Bloomberg Businessweek story.
Ah yes, China has so many dollars ($2 trillion or so among its $2.5T reserves) that it can buy the U.S. economy--lock, stock and smoking barrel.
Except, of course, the US economy is a bit larger that $2T, and it turns out that China has let its local governments, using shell entities (local investment companies, or LICs, who borrow what the local governments are forbidden to borrow legally on their own), borrow upwards of about $2T, according to the estimable Victor Shih of Northwestern U.
There are 8,000 such LICs in operation across China, and most are used by local governments to finance infrastructure build-outs.
How many bridges to nowhere--as in, non-performing or unuseful loans?
Who knows. Certainly the rush to spend was great, so assume tons of waste.
The key bit:
Many of the LICs have borrowed heavily to back the building of roads, railroads, and power plants, as well as hotels, convention centers, office buildings, and more. While some LICs have gotten land from local governments that they can use as collateral, many banks must rely on pledges from local city halls that the loans the LICs secured will be repaid. Shih figures outstanding LIC debt at the end of 2009 was $1.68 trillion—34 percent of China's gross domestic product. "A lot of this money is being invested in money-losing infrastructure projects [as well as] real estate," says Shih. Western investment firms are wondering what impact the LICs will have on Chinese banks if they cannot pay back the bulk of their debts. "Unfortunately, this smells like China's last banking crisis," says Shen Minggao, an Asia-Pacific economic analyst with Citigroup (C).
Point being: that $2T can go quickly, under the right circumstances.
Cheap money makes dummies of us all. The Chinese are no different.