Economists In China Are Asking A Disturbing Question: Where Has All The Money Gone?

Chinese credit growth has outpaced GDP growth for some time.

Some have argued that this is the main bear argument on China right now. 

Many are asking why this is the case? Where all the money's gone? And is China facing it's own Minsky moment — a phenomenon that refers to periods of speculation that lead to crisis and that was named after economist Hyman Minsky who wrote about the inherent instability of bull markets.

In a new note, Bank of America's Ting Lu writes that this has raised questions about whether the non-performing loan ratios are higher than expected, if there are more artificially propped up investment projects that are using new credit for interest payments, is there more speculation than people realize 

"Property speculation and a rising number of zombie companies," partly explain the credit-GDP growth gap he write. "More careful study tells us that the gap is smaller than what had been believed due to double counting and other distortions, and a majority of the gap could be ascribed to reasonable changes in fundamentals and short-term factors which should not be extrapolated."