In addition, local governments have secured further lending commitments that have not been drawn down. The analysis does not take into account significant off-balance-sheet and unofficial lending activity.
The debt levels are exacerbated by what Michael Pettis in his book The Volatility Machine described as an inverted debt structure, where borrowing levels increase when the economy has problems. Irrespective of current moderate debt levels, when the economy slows, China's debt levels, both direct and contingent, will increase rapidly.
China also has limited flexibility in managing its currency. The renminbi has risen 30 per cent since Beijing adopted a policy of managed appreciation and revalued its dollar peg in July 2005. As growth and exports slow (the trade surplus has fallen to 2 per cent and foreign exchange reserves are falling), China would prefer to let the renminbi fall to cushion the adjustment.
In an US election year, the risk of trade protectionism and the prospect of being referred to the World Trade Organisation for currency manipulation limit China's policy flexibility.
The end of a cycle of debt and investment driven growth is typically disruptive. Japan's experience, which China has drawn on in shaping its economic model, is salutary. Japan grew by 10 per cent in the 1960s, 5 per cent in the 1970s, 4 per cent in the 1980s, and has remained stagnant since, adjusting to the deflation of its debt-fuelled bubble.
China's recent decision to lower its interest rates and ease lending restriction reflects increasing concern about its economic health and policy constraints.
It seems inevitable that China's growth will slow, with only the extent and speed in question. The real question is whether it can manage its transition to lower growth without social upheaval.
The ability of China to support the seriously compromised global economic and financial system is overestimated. At the Group of 20 meeting in Mexico, Chinese leaders repeatedly stressed that they were unable and unwilling to stimulate their economy to the extent being urged by developed nations because of China's own economic constraints.
As an old Chinese proverb, probably apocryphal, holds: "There is no feast that does not come to an end."
