China’s Rmb4tn stimulus package in 2008 – and its ballooning lending – has raised fears of a financial collapse. Certainly, debt has exploded. The China Academy of Social Sciences (CASS) estimates that total government debt is now Rmb 27tn, or 53%, of GDP. Throw in corporate and household debt, and CASS estimates the total at Rmb 111.6tn ($18.3tn) at the end of 2012, or 215 per cent GDP.

Chinese economists are quick to point out that the country has plenty of money to pay off its debts and could easily avert a financial collapse. The government, they say, could function as lender of last resort.

Fitch Ratings agrees. In April, Fitch reaffirmed China’s Sovereign Debt Rating at A+ with a stable outlook. China’s $3.8tn in foreign reserves is a “core sovereign credit strength.” Although worried about China’s growth model, due to leverage and ability to absorb further investment, the agency praised China’s “powerful levers for short-term demand management” due to its state ownership. Other good signs are the People’s Bank of China’s two year timeframe to free up interest rates and China’s “ambitious reform agenda.”