[faitswulff]

> They’ll nationalize and inflate away any institutional debt or wipe it out

This is just the reverse, actually, China isn’t afraid to go so far as to jail CEOs. There is no such thing as too big to fail in China, and all the Chinese domestic companies know it. The bailout playbook is a western thing.

[toomuchtodo]

China has been performing debt swaps with local governments to clean up their balance sheets [1], so used as an example. Agree with all of your comment. People make the mistake that China plays by artificial US capital market rules around profit and debt; they do not. They optimize for physical world success, not line go up.

[1] Why China Is Hoping $1.6 Trillion Can Fix Its Hidden Debt Problem - https://www.bloomberg.com/news/articles/2025-04-16/china-eco... | https://archive.today/HsaHV - April 16th, 2025

[faitswulff]

Ah, I think I get it. Are you saying that regardless of BYD’s continued existence, China will still have 1/3 of the world’s manufacturing capacity?

[toomuchtodo]

Yes, exactly. Just as in the US, when an enterprise gets wiped out and recapitalized, all of the physical assets remain. In China’s case, they are the backstop of last resort, and will always recapitalize according to their nation state planning and target outcomes. They allow companies to operate the assets as long as the Chinese government is willing to allow it, but they remain assets of China.

[truetraveller]

So, essentially, there is a root company called China, Inc. Correct?

[tifan]

Exactly. Not strictly China Inc, but SASAC (https://en.wikipedia.org/wiki/State-owned_Assets_Supervision...)

[refurb]

There is no free lunch. Debt in China is still owed to someone. Printing money creates inflation. Oversupply leads to deflation.

It’s why China’s real estate company debt is dragging down the economy as a whole. It’s all connected.

China very much is held to the same rules as the US, especially as it engages with the global financial system.

Which is why they are in so much trouble. The economy is anemic. The last stimulus package barely made a difference. Debt overhang remains.

[amrocha]

There actually literally is a free lunch. Debt owed to the government by itself isn’t real. Assets and infrastructure are real.

It doesn’t matter how much you think China is in trouble financially, at the end of the day they still manufacture a third of everything in the world.

[refurb]

> There actually literally is a free lunch. Debt owed to the government by itself isn’t real.

False.

It may not be the same as debt owed to other parties, but not paying it still has consequences for things like money supply.

Otherwise, why would the government not just lend endless amounts of money? Even the Chinese government knows they can't do that.

> It doesn’t matter how much you think China is in trouble financially, at the end of the day they still manufacture a third of everything in the world.

Their output doesn't really matter when it comes to their financial situation. You can produce a lot and still be in trouble. And it's not me that is calling out China's problems, China is talking about it as well.

[amrocha]

I never said anything about lending infinite money, don’t straw man me.

The constraint is on real resources, which China has plenty of, regardless of how much debt they have.

The financial situation is an accounting detail. China could decide to write off all debt it owes to itself tomorrow, and literally nothing would change.

[refurb]

> I never said anything about lending infinite money, don’t straw man me.

You did say...

> There actually literally is a free lunch. Debt owed to the government by itself isn’t real

Which I think is reasonable to interpret as lending infinite money.

> The constraint is on real resources, which China has plenty of, regardless of how much debt they have.

I'm not even sure what you're saying here. Constraint on what? Money? Economic growth?

Assuming you mean money, it doesn't make much sense. Ok, China has lots of real resources. In order to pay down debt, they need to turn those resources into money. They can certainly create the supply, but they also need demand.

It's like Canada saying they have infinite resources in their timber. "We'll just cut down the wood and sell it". Well there isn't infinite demand for timber, so in fact, having a lot of resources doesn't mean you have endless money.

> China could decide to write off all debt it owes to itself tomorrow, and literally nothing would change

Absolutely not true. Look at the real estate developers. China is working hard to get them out from under the crushing debt they have. If, as you claim, they could "write off all debt, and literally nothing would change", why didn't they.

The answer is that China is mostly a market economy. Writing off debt has massive consequences bothing domestically and internationally.

This is the trade off China made when relying on the free market for growth. If they want to leverage the free market, then they are held to the free market's rules (which they are currently dealing with).

[victorbjorklund]

They only jail the people that upset the regime.

[ben_w]

From the outside, it appears that "upset the regime" includes "cheating your way into profits".

That said, it's very difficult to be sure if what I see from the outside is propaganda. Or rather, it is always propaganda even when it's true, and I can't tell how much of it is China's own self-promotion vs. other people giving negative propaganda.

[victorbjorklund]

You don’t think president Xi:s family and friends cheated? Of course they have. Yet they don’t go to prison.

[ben_w]

I'm saying from the outside, it doesn't look like that. That's a much weaker statement, as should've been obvious from what I went on to say about propaganda.

Example of cheating: https://en.wikipedia.org/wiki/Officials_implicated_by_the_an...

And: https://en.wikipedia.org/wiki/2008_Chinese_milk_scandal#Arre...

Nevertheless, it would be interesting if someone could, you know, prove, and not merely allege, that Xi Jinping's family or friends cheated.

[ctchocula]

https://panamapapers.org/case-study-china

[ben_w]

Yup, that's the kind of thing I have in mind.

Even with the sub-heading "It's legal, and that's the problem."*, and even though this kind of cheating is broader than this reply chain from "There is no such thing as too big to fail in China", this is absolutely within bounds for what I asked for :)

* and the not-proof-read AI generated image, that never helps…

[victorbjorklund]

so you think that Xi:s family just lives on his official salary and he hasn't made any money more than that?

[ben_w]

That's not what I said.

There's ways to invest in stocks that are not cheating, for example.

Or, you know, they might have done what I myself am doing right now and be landlords. That's not cheating. Or at least, I don't think it is, I don't know what the Chinese government considers it to be, what with communism and all.

For this context: cheating is in the sense of "large bets where the cost of failure will be paid by the state and yet they get to keep the profits in the event of success": I think that if any of them have made such bets, those bets have paid off. I think that if any such bet had been made and failed, it would have been noticed by people outside China.

As I said:

  From the outside, it appears that "upset the regime" includes "cheating your way into profits".

Key parts: "from the outside", and "appears".

In the event they make a bet and it fails and we spot it, that specific chain is what would make it cease to "appear" to be so "from the outside".