Arthur Kroeber

Just like build whatever you want.

And so what happened at that point was that all of the commercial banks got into this business of lending money to local governments for these infrastructure projects.

And their underwriting standards were much less robust than the China development banks had been.

And the local governments just, you know, it was free money to them.

So they just like took all the money and they ran with it.

And then that created this kind of Frankenstein's monster.

Even so, I think you had quite a lot of that money in the first two years went into...

probably generated a pretty good return because China was still underbuilt relative to what it needed to be.

But after that had run for three or four years, it became clear that a lot of this was going into wasteful projects and it didn't deliver a good return.

And now they've been struggling for the last decade for how to unwind that.

But I think it's important to understand that the underlying model was actually an okay model.

It just...

wound up being done in a way that was completely uncoordinated and excessive and led to a lot of, and you didn't have incentive structures that enable local governments to reign it in when they needed to.

So I still think that that is fundamentally, that is a local government fiscal problem, which ultimately is a central government fiscal problem.

If you look at the consolidated balance sheet of the central and local governments, put them all together,

China's government debt is still probably less as a share of GDP than U.S.

federal government debt, right?

The U.S.

is over 100%.

China is probably under 100%.