This blog post explains why China&#x27;s debt is a problem: <a href="http:&#x2F;&#x2F;blog.mpettis.com&#x2F;2016&#x2F;01&#x2F;will-chinas-new-supply-side-reforms-help-china&#x2F;" rel="nofollow">http:&#x2F;&#x2F;blog.mpettis.com&#x2F;2016&#x2F;01&#x2F;will-chinas-new-supply-side-...</a><p>From what I understand (something may be getting lost in translation)<p>- The increasing debt is being used to keep up growth<p>- The growth that is being bought by the debt isn&#x27;t enough to service the debt<p>- Some sector of the economy will have to pay for it, because growth will wither until it is paid.<p>Quoting: <i>China is also constrained from reducing the debt burden though monetization, financial repression, or taxes on households because in each case the cost is indirectly allocated to the household sector, which simply exacerbates the original imbalance. This leaves only two alternatives. First, Beijing can expropriate the wealth of small and medium enterprises directly or indirectly (in the latter case by raising taxes), although this means undermining the most productive part of the Chinese economy. Second, Beijing can liquidate government assets and use the proceeds to pay down debt. There are no other plausible options. </i><p>edit:<p>also: the process of deciding who gets forced to bear the debt will be highly politicized and contentious. The blog post explains how there are strong negative consequences to each choice.