Few countries graduate from the investment-defined categories of frontier, emerging and developed economies — Japan and South Korea being notable exceptions. However, with an economy surpassing the US in size when measured on purchasing power parity, and with wealth per capita growing swiftly, it isn’t far-fetched to say China is on the path to graduating from emerging market status in the not too distant future. Focusing for a moment on the near term, rising interest rates present a hiccup in this growth path, especially when one looks at the role of credit in the pace of China’s rise. To skip forward to the conclusion, the almost linear growth that China has enjoyed since the 1990s will, to any but the most optimistic commentator, come at the cost of a banking crisis somewhere down the line. Rising interest rates and a decline in global growth could bring this reckoning even closer. Extending credit is all too easy; getting out of the habit rather more difficult. This is especiall...

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