Another day, another jaw dropping statistic about China’s increasingly untenable economic situation. Today’s comes from Crescat Capital’s second quarter letter to investors, which takes an eye-opening walk through China’s debt expansion of recent years. Included in the letter is the following chart, that shows the enormous divergence between the growth in liabilities held by publicly traded Chinese companies, and their free crash flow. While total liabilities have surged to nearly $5.5 trillion, cumulative free cash flow since 2001 is negative. The equivalent metric for the US (S&P 500) shows cumulative free cash flow exceeding total liabilities over the same period by approximately $2 trillion. The enormous divergence between liabilities and free cash flow at Chinese companies has likely been driven by massive capital expenditures that have left countless industries from coal, to steel, to glass, to solar panels with excessive over-capacity. With global consumption weak and import prices low, the debt fueled Chinese capacity build has left corporate China in a highly precarious position.