Jim Rickards : "China has $1 trillion or more in bad debts waiting to explode. These bad debts permeate the economy."
Some are incurred by Chinese provincial authorities trying to get around spending limitations imposed by Beijing. Some are straight commercial loans on bank balance sheets. Some are external dollar-denominated debts owed to foreign creditors.
The most dangerous type of debt involves a daisy chain of insolvent corporations buying debt from each other.
A single cash advance of $100 million can be passed from corporation to corporation in exchange for a new promissory note, used to extinguish an old unpayable promissory note. Repeated enough times, the $100 million can be used as window dressing to prop up $1 billion or even $2 billion of bad debts...