Listen to Economic winter getting explained by @indiacharts in this video:



And then is this chinese debt crisis explanation https://twitter.com/palkisu/status/1337394243212460038

Now the insight derived by learning about economic winter.
China had been going through some financial difficulties for a while.

China’s shadow banking system had shown first symptoms a long time ago.
The rapid rise if shadow banks had resulted in a bunch of articles about 2014.

But it didn’t raise any alarms

Then there had been a series of something like a default.

Now, all these defaults were aggressively covered by Chinese government as was expected.

Then a bunch of banks started failing.
Of course, government stepped in.
But, it was becoming increasingly evident that state cannot rescue every failure.

So, about 2018, a few were allowed to fail.
Basically, the company skipped paying coupons. Company took a hit. Some investors suffered. But most were assured that these were one off cases.

Then came the bunch of state owned companies, mostly steel, struggling. These are sensitive. Too many people are employed. State couldn’t afford too much bandwidth of quenching too many protests.
So, there was some M&A engineered and some debt was carried forward.

Economic winter(my understanding) is when there is too much debt. When there is over leverage, there are only two things that can be done.
Cut debt.
Grow more so that servicing of debt becomes less of a problem.

Now, china has limits on its export led growth. China has been too export dependent. Its BRI plan to acquire more customers didn’t work out well.

And, since china is primarily driven by exports, it can’t play too much with its currency.