Two Troubling Scenarios

Even though no one is saying a China bust is inevitable, investors are preparing. Here's how it could play out
Graphic by Bloomberg Businessweek; Illustration by Matt Owens

If a crash or a slowdown occurs in China, it will be brought about either by a spike in inflation or a collapse in real estate. If prices escalate, the government is likely to drive up interest rates. If apartment prices fall steeply, ordinary Chinese could lose their savings and local governments may be unable to pay off loans they took out to invest in development projects. In either case, China and the global economy will suffer.

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