Chinese stocks have dropped for four straight weeks to their lowest levels in seven months, following a government crackdown on financial leverage.
In fact, the Chinese policy-makers’ crackdown on leverage has already erased about $500 billion from the value of the Red Dragon’s stocks and bonds.
There’s no doubt in my mind that China’s credit boom was getting a little out of control. Take a look at this Bloomberg Intelligence chart.
You can clearly see that since 2008, China’s total debt as a percentage of GDP has skyrocketed – from about 160% in 2008 to almost 260% in 2016.