Guo’s fear is that excess leverage in the property sector — which accounts for about 39% of total outstanding bank lending — is the “biggest gray rhino risk” facing China’s financial system. The enduring impact of the pandemic has created a growing problem of non-performing loans, driving smaller lenders to insolvency. Last month saw a series of defaults by state-owned companies in China. And last week S&P Global Ratings warned that local government financing vehicles could be the next casualties as the authorities clean house.

After the disease, the debt. But it’s important to look not just at public debt but also at private debt when trying to see which great power has the steeper mountain to climb.

Niall Ferguson is the Milbank Family Senior Fellow at the Hoover Institution at Stanford University and a Bloomberg Opinion columnist. He was previously a professor of history at Harvard, New York University and Oxford. He is the founder and managing director of Greenmantle LLC, a New York-based advisory firm.

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