"According to the Economist magazine, China's total debt has gone from 155 percent the size of its economy in 2008 to 260 percent by the end of 2015. And that, in turn, has created three big problems. The first is that most of this money has poured into just a few sectors of the economy — in particular, steel, cement and housing. The result has been a glut that has pushed down prices so much that companies can't afford to sell at them. But they can't afford not to either, because they need some money coming in to at least pay the interest on what they owe. In a normal economy, the word for this kind of situation would be "bankruptcy." But China is far from being a normal economy. The government still controls a lot of banks and companies, so it can tell them when to lend, when to borrow, and when to restructure or roll over debt all in the name of social stability rather than making money. It can also subsidize electricity or just give companies cash outright to keep them in business. That turns them into zombies — not so dead that they need to fire people, but not so alive that they can hire more — just kind of stumbling along. That brings us to problem No. 2. It's hard to lend out so much money so fast without a lot of it going to people who won't be able to pay you back. In China's case, the consultancy Oxford Economics thinks this could add up to nonperforming loans equal to 14 percent of gross domestic product. Now, it's true that China was able to grow out of an even bigger debt problem 15 years ago, but its economy has slowed too much to pull off that again. Beijing is trying to get lenders to instead swap their bad debts for ownership stakes or sell them to investors [..] every time the economy slows down, like it did last year, the government just opens the lending spigots up again —which you can tell by the fact that its housing market is looking bubblyagain. But while this adds more debt than before, it doesn't add as much growth. Think about it like this. China already has so much debt that a lot of new loans are just going to pay for old ones instead of for new projects. So that means it's getting less bang for the borrowed buck — about a quarter of what it did in 2008. Now, if this sounds too close to being a Ponzi scheme for comfort, that's because it is. But it's been Beijing's policy for the past five or six years even though it knows better."