Even as the US, Greece and other countries struggle with their own impending budget meltdowns, China is quietly doing so as well. And while other countries have had their budget woes played out in public,there has not been as much mentioned about what is going on in China.

The problem in China started with the collapse of the global economy which started with the banking problems in 2008 in the United States. During that banking crisis, the US as well as several European countries and China all did the same thing: they pumped a flood of government sponsored cash into the local economies in the hopes of stimulating spending as well as backing several infrastructure projects meant to improve roads and build power plants. But, the money that was pumped into those local cities and government was not spent on the intended projects and now those projects are not only swamped in looming bad debts but are largely sitting empty and unused. Railways, meant to connect the booming areas of China with the other, poorer districts travel back and forth with very few, if any passengers in them. The super highway systems that were part of the stimulus are empty, much of the time.

An audit of the Chinese economy revealed that its thirty one provinces as well as hundreds of municipalities collectively have over a trillion dollars in loans with nearly a quarter of that likely to be written off as a bad debt. Some $463 billion dollars of those bad debts are likely to be written off of the books by the local areas and they each may be legally allowed to sell bonds to raise new cash.

By law, Chinese bankers are allowed to rollover bad debts and can continue to do so, indefinitely. China did this, successfully in the late 90’s. Eventually the bad debts will come back to haunt the government , but for now, the Chinese economic experts are looking for ways to spin the other, less savory alternatives, including reduced government spending. Chinese workers just got the benefit of higher wages but at a price. Now it costs more to do business in China, historically a country that ran on low cost workers, allowing them to climb to the number two spot in the world economy. Now, without the cheap labor to run on, businesses are packing up and moving to other provinces, leaving behind empty buildings. Business owners are heading to the inland regions, especially in areas of Western China where cheap labor can still be found.

China’s economy may be ready to make that bounce back faster than the other countries, especially in the US and in Europe, mainly because of the willingness to just rollover the bad debts, something that would not work in other systems in the world. Rioting broke out in Greece because of the looming debt crisis in that country and the US has seen major budget woes as well.