Will,

I don't think there's agreement as to how quickly bank assets have grown. Your chart shows them more than quadrupling since early 2012. The time frame seems too short, which is why the annual asset growth is so astronomical. Other charts show that assets have indeed quadrupled, but that's going further back to the financial crisis and the post-crisis stimulus of early 2009:

http://www.zerohedge.com/news/2015-11-02/one-analyst-says-chinas-bankin…

http://www.zerohedge.com/news/2013-11-25/chart-day-how-chinas-stunning-…

Banking assets, also, aren't entirely loans. A better gauge of the country's debt situation is from McKinsey's global debt report below, page 10:

http://www.mckinsey.com/~/media/McKinsey/Global%20Themes/Employment%20a…

It has China's total debt quadrupling from $7 to $28 trillion, or from 158 to 282 percent of GDP, from 2007 to mid-2014.

Granted, this growth is still staggering - China's banking sector (not even including most of shadow banking) has grown by almost twice the entire US banking sector since before the crisis.

Kyle Bass, in making his wager against the yuan, apparently is closer to your banking assets chart: he notes that the bank sector expanded 11.5-fold in a decade, from $3 to $34.5 trillion:

http://www.cnbc.com/2016/02/10/kyle-bass-china-banks-may-lose-5-times-u…

That implies a roughly 7-fold increase since the onset of the financial crisis (Q3 2008).

Additionally, you'll note in the first Zero Hedge link above that the highest independent estimate of NPLs is 21 percent, so Gordon's assertion of "easily 20-30 percent" is on the high end. (He's been waiting for China to collapse for 15 years, so that's his bias.) Chinese banks and bank investors typically use a 10 percent bad loan ratio when making lending and investing decisions, respectively.

On the other hand, even an unsanctioned Chinese officials' report estimates that the country wasted a whopping $6.9 TRILLION of investment:

http://www.reuters.com/article/china-economy-investment-idUSL3N0TA2KP20…

That would be anywhere from 33 to 40 percent of the total credit expansion post-crisis (post-stimulus).

Last but not least, it's simply incorrect to apply Western financial standards to what essentially remains a communist system. The very argument that people like Chang and Bass use to argue that a banking crisis is inevitable - that most lending is a political rather than commercial decision in China - is also the reason why it simply won't blow up like the Western financial system in 2008. Were it not for all those trillions of capital misallocation, the communist party wouldn't be in power, and the 60 million state workers which form the core of its economic support base won't have survived.

If you're betting against the Chinese economy (i.e. its financial system or currency), you're essentially betting that the communist dictatorship will lose power. Gordon Chang at least has never been unclear on this point. That's where his argument is fundamentally flawed, IMHO. Even if things get much worse, the regime has the means to crush any credible opposition. Xi is willing to sacrifice the wealthy elites for the rural and working masses - he doesn't mind seizing their assets to redistribute to the general population, since it'll be perceived as part of the anti-corruption campaign. At worst, the elites and best and brightest will all flee abroad, but the party has always been prepared for this anyway: when the West urged them to democratize in the early years of reform and opening, they simply answered, "So, you want 200 million of our people landing on your shores?"

I don't think Americans and Canadians will be pleased to see more cities end up as unaffordable as Vancouver, what with all the influx of Chinese people and cash.