China's great construction boom is over. Credit:Nelson Ching In 2009, as China unleashed a massive fiscal stimulus and investment spree in response to the global financial crisis, the rest of the world was too willing to believe the impossible. Aided by consultant research predicting decades of explosive growth, companies placed huge bets on China and expected to ride the never-ending boom to riches. Amid the gold rush, they bulked up to sell Chinese T-shirts or tonnes of iron ore. They urged their governments to sign free-trade deals with Beijing. Commodity producers heedlessly expanded capacity, believing that 10 per cent growth would continue indefinitely. Consumer brands rushed to set up flagships in third-tier Chinese cities. Shipping companies scrambled to build fleets to meet an expected explosion in global trade.

However, as with many previous bouts of irrational exuberance, this time wasn't different. The ruthless rules of supply and demand still applied. And now, the longer that painful decisions are delayed, the harder they'll become. Commodities firms, in particular, are learning that lesson the hard way. As prices rose with Chinese demand, they made large upfront investments financed by borrowing – often on a 20-year timeline – in the expectation that growth would last and last. Now, with China's economy slowing and the prices of everything from oil to metals plummeting, the bills are coming due. Fundamental mistakes can't be blamed on China. Doing so only delays the inevitable.

Major iron ore firms, which had predicted Chinese steel demand would rise until about 2030, are looking at substantial over-investment and deteriorating credit. Dairy farmers, who increased their herds with future Chinese consumer demand in mind, are feeling the pinch as milk prices plunge. After years of ramping up production to fuel China's expected growth, oil-producing countries from Saudi Arabia to Norway are facing grim decisions about their public finances. Russia is rapidly draining its sovereign wealth fund. Venezuela is pleading with China for loans – on top of the nearly $US60 billion doled out – to stave off collapse. Pundits are warning the large debt load of US shale gas and oil producers may pose greater risks than the sub-prime lending from a decade ago.

No less so than China, the rest of the world needs to face up to new realities. Illustration: Rocco Fazzari Credit:Rocco Fazzari First, the golden age of Chinese construction is over. There's enormous surplus capacity in every industry that requires fixed asset investment. Companies can no longer rely on the "Beijing put" of new government stimulus to boost growth. Iron ore producers and copper miners need to begin a painful process of downsizing and deleveraging, just as China's bloated state-owned enterprises do. Producers around the world haven't faced up to the new normal. Second, companies of all stripes must understand China better. Expectations of double-digit growth, regardless of how poor the performance, have vanished.

Luxury brands that have hoped their Beijing flagships will smooth the balance sheets at European headquarters need to recognise that different markets require different strategies, and that shops in China won't run on autopilot. They need to compete. Third, companies and countries alike need to face up to their irrational exuberance. Whether it's failing to diversify, spending recklessly on the back of high prices, or taking on too much debt, fundamental mistakes can't be blamed on China. Doing so only delays the inevitable. Few investors seem to appreciate the balance sheet reckoning that is coming. Failing to address the global supply glut only increases the risk of a larger correction. We know that because this time isn't different: The bill always comes due. Christopher Balding is an associate professor of business and economics at the HSBC Business School in Shenzhen Bloomberg