The great Chinese growth slowdown has been proceeding in stages for the past two years. The reason is simple.

Much of China’s “growth” (about 25% of the total) has consisted of wasted infrastructure investment in ghost cities and white elephant transportation infrastructure. That investment was financed with debt that now cannot be repaid.

This was fine for creating short-term jobs and providing business to cement, glass and steel vendors, but it was not a sustainable model since the infrastructure either was not used at all or did not generate sufficient revenue.

China’s future success depends on high-value added technology and increased consumption. But shifting to intellectual property and the consumer means slowing down on infrastructure, which will slow the economy. In turn, that means exposing the bad debt for what it is, which risks a financial and liquidity crisis.

China started to do this last year but quickly turned tail when the economy slowed. As this article shows, the economy has slowed so much that markets are collapsing.

The government intervened on Oct. 19 to prop up the market but this solution is strictly temporary. With every passing day, a Chinese financial collapse draws closer. The rest of the world will not escape the consequences.

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