With 85% Of Businesses Set To Run Out Of Cash In 3 Months", in which we explained that while China's giant state-owned SOEs will likely have enough of a liquidity lifeblood to last them for 2-3 quarters, it is the country's small businesses that are facing a head on collision with an iceberg, because according to the Nikkei, over 85% of small businesses - which employ 80% of China's population - expect to run out of cash within three months, and a third expect the cash to be all gone within a month.

To be sure, the stakes could not be higher: These smaller employers account for 99.8% of registered companies in China and employ 79.4% of workers. They contribute more than 60% of gross domestic product and, for the government, more than 50% of tax revenue. In short: they are the beating heart of China's economy.

In short, should this default tsunami start, not only will China's economy collapse, but China's $40 trillion financial system will disintegrate, as it is suddenly flooded with trillions in bad loans.

Well, it is now one month later, and as we feared, and as the SCMP reports, "a global consumer default wave is just getting started in China" as overdue credit-card debt in China has soared by about 50% in February, while researchers at the Peterson Institute warn (as we did in February) that what is happening now in China is "a preview of what we should expect throughout the world."

Take the case of Zhang Chunzi - like millions of people around the world, she borrowed money she thought she would be able to repay before the coronavirus changed everything. Now laid off from her job at an apparel exporter in Hangzhou, the prosperous capital of east China's Zhejiang province, the 23-year-old is missing payments on 12,000 yuan (US$1,700) of debt on her credit card and an online lending platform operated by Ant Financial.