The Chinese premier's comments are discussed here in The UK Guardian:
Premier Li Keqiang told lenders to China's private sector factories they should expect debt defaults as the world's second largest economy encounters "serious challenges" in the year ahead. ... Li's warning followed the failure of Shanghai Chaori Solar Energy to make a payment on a 1bn yuan (£118m) bond last week. The default was the first of its kind for China and widely seen as pointing to the end of 11th-hour government bailouts for troubled enterprises. Some analysts said the decision to let some indebted firms collapse was a sign the authorities had learned from the Japanese boom and bust experience of the late 1980s and early 1990s. Tokyo was plunged into two "lost" decades of stagnation after it prevented zombie companies from declaring bankruptcy – even blocking petitions from bondholders in the courts - when a property collapse exposed debts many times the value of their businesses.
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If only we could get Americans to practice some similar capitalism by letting companies and banks fail instead of bailing them out.
China can afford the Keynesian stimulus, however, unlike the US. They've got the savings Keynes prescribed, in the form of massive foreign reserves.
Too bad America has no such savings.
