Channel Theory and Chinese middle class victims

China Cities Value Land at Winnetka Prices With Bonds Seen Toxic

Loudi, home to 4 million people in Chairman Mao Zedong’s home province of Hunan, is paying for the project with 1.2 billion yuan ($185 million) in bonds, guaranteed by land valued at $1.5 million an acre. That’s about the same as prices in Winnetka, a Chicago suburb that is one of the richest U.S. towns, where the average household earns more than $250,000 a year.

There is no secondary market in local government bonds in China, hence no way to match monetary value to city owned land value. In channel theory that means each locality runs up the debt then goes insolvent near synchronously, thus allowing Chinese apparatchiks to wallop the middle class in larger bailout costs at at longer irregular intervals.