Despite that slow growth — which many analysts say actually is better than the reality — new borrowing has climbed to its highest level in six months. It's enough that China now has more total debt—including the government, households, and corporations—relative to the size of its economy than we do to ours.

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Now wait a minute. Why is China racking up so much debt? Well, the simple story is that Beijing has tried to replace all the foreign customers it lost during the financial crisis with even more spending on roads, buildings and other infrastructure until Chinese customers are ready to take their place.

But that last part is a lot trickier than it sounds. It means building a stronger safety net so people feel like they can spend. And letting zombie companies go out of business so there's room for actually successful ones that can afford to pay workers more. And then giving people enough time to get used to the idea of not socking every last yuan away. Beijing, though, hasn't done any of this. Instead, it's just told state-owned companies and local governments to keep borrowing more and more and more without much of a plan for doing anything else tomorrow. The result, as you can see in the chart below from UBS, is that China is getting into even more debt at about the same pace it was five years ago.

This will not end well, and the government knows it. You just can't add this much debt this fast without a lot of it going bad. And it looks like it's already starting to. Developers have built cities where nobody lives, companies have built factories that nobody needs, and local governments have built airports that nobody uses. So why hasn't Beijing put the brakes on this? Well, it tried. First, it said that it wouldn't let local governments, which have been a conduit for a lot of this borrowing, do any more. But then it changed its mind as soon as this made the economy start to sputter. It did bring back the limit a few months later, but there's a big enough loophole in it—indirect liabilities are excluded—that it's not clear how much it will really do. Now, you probably heard about the second thing it did. That was hyping up a stock market bubble that it hoped would help companies get the cash they needed by selling equity rather than taking on debt. That hasn't exactly worked now that stocks are down 44 percent from their peak last summer.

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So now it's back to Plan B: borrowing, borrowing, borrowing some more.

There are two problems here. The first is that China needs more debt just to create the same amount of growth as before. In other words, it's not getting as much bang for the borrowed buck as it used to. Why is that? Well, China already has so much debt that a lot of times new loans are going to pay for old loans instead of for new projects. If that sounds like a Ponzi scheme, that's because it's dangerously close to being one. But the second problem is not that this bubble might burst—Beijing would probably do whatever it took to stop that from happening—but rather that the losses and bailouts pile up so much that growth falls from 6 or 7 percent down to 3 or 4 percent. The irony, of course, is that this constant focus on keeping the economy growing today might prevent China from making the reforms it needs to keep the economy growing tomorrow.