There's a lot of hyperbole in this post. The graph you link to of debt-to-GDP is actually very similar in China (282), South Korea (286), Australia (274), USA (269), Germany (258), and Canada (247). And for the record, South Korea's is higher than China's according to that graph. China's is more heavily weighted in "non-financial corporate" which is interesting.
You're assuming both a continued free-fall at the same rates and also that p/e ratios in China mean the same thing as they did for .com companies in 2000 in USA. Any market newbie will tell you that what a "normal" p/e ratio is will differ greatly by sector even within the same economy. China's may be out of whack, but it's not fair to make an arbitrary comparison.
I'm no China apologist, but making predictions of 10-20 years of decline with an authoritative tone is wrong given the facts you presented.
I think hysteria would be warranted if the Chinese government were to take a Schumpeter/Hayek/Mellon liquidationist response to the collapse of the market bubble (see the US/Europe circa 1929). Why yes then you would have contagion spreading out into the real economy and a long depression.
I'm thinking not. Instead I the Chinese central bank will inject liquidity again, much to the horror of the WSJ Editorial board who will again sternly warn that such actions, mark their words! come to an bad end!
And the shanghai stock market is not "close to retracing back to 2000." This graph shows, it's well above that: http://www.tradingeconomics.com/charts/china-stock-market.pn...
You're assuming both a continued free-fall at the same rates and also that p/e ratios in China mean the same thing as they did for .com companies in 2000 in USA. Any market newbie will tell you that what a "normal" p/e ratio is will differ greatly by sector even within the same economy. China's may be out of whack, but it's not fair to make an arbitrary comparison.
I'm no China apologist, but making predictions of 10-20 years of decline with an authoritative tone is wrong given the facts you presented.