China is more dysfunctional than we can imagine.
The fact that the mechanics of a crisis are hard to sketch out doesn’t mean that the system works well. You know those Chinese ghost cities, the eerie forests of apartment buildings and commercial complexes equipped with everything except people? Those homes are a major store of value for Chinese families. With bank account interest rates fixed, a fledgling stock market full of speculative issues, and few financial connections to the outside world, the Chinese have been forced to look into nonfinancial stores of value for their massive savings rate. Like us, they often choose real estate. But not to rent, because that would devalue the property; the Chinese place a high value on new. No, they buy the houses and keep them empty, as stores of value rather than places to live.