Keep pulling the thread on Michael Pettis.
China's high-investment growth model created political and institutional resistance to change because constituencies that benefited disproportionately, such as those in infrastructure, property, and manufacturing, built institutions to protect their advantages.
Michael Pettis estimates that the wealth transfer from Chinese households to the producing sector via artificially low interest rates may have been as high as 5% of GDP annually during the 2000s.
Michael Pettis asserts that China has been massively over-investing in property, infrastructure, and manufacturing since approximately 2008-2010.
The province of Guizhou effectively announced its bankruptcy when it stated it could not service its debt without external help, formally recognizing the severity of China's local government debt problem.
China's investment as a share of GDP is currently about 43%, having previously been as high as 47%, which is significantly above the global average of 25%.
Over the last decade, household debt in China grew so rapidly that, relative to income, it exceeded the levels seen in the United States.
Michael Pettis asserts that China has experienced the fastest growth in its debt burden in recorded history, leading to extraordinarily high current debt levels.
Raising interest rates in China would likely trigger a wave of bankruptcies among over-indebted state-owned enterprises, local governments, and private businesses.
In China, the household sector's share of income is estimated to be around 60% of GDP, with businesses and government each accounting for roughly 20%.
Michael Pettis predicts that global trade conflicts, particularly those involving China, will worsen for many more years before they improve.
A major technical obstacle to implementing direct consumption stimulus in China is the lack of a national-level institutional framework for distributing income to households, as such systems are managed at the municipal level.
The high-savings, high-investment growth model, used by China and other countries, has historically transitioned from a period of healthy growth to unhealthy, debt-driven growth, ultimately leading to a difficult adjustment period.