The People’s Republic of China may be approaching a problem with off-books lending as its economy—restarting though it is—still is stumbling badly, which coupled with the government’s attempts to rein in debt creation generally, is making it difficult for businesses and individuals to obtain credit.

Off-balance-sheet entities are selling bonds to finance projects such as investing in warehouses, expanding underground metro networks, building data centers or renovating shantytowns.

Such debts, though, afford government at any level little direct oversight—which the PRC government levels especially desire—and they have often fed wasteful spending.

And

In all, borrowings by such local-financing vehicles make up about 9.5% of China’s total yuan bonds outstanding….

That’s a lot of hidden debt. To give some concreteness to such debt, in just the first four months of this year, the “local government financing vehicles” sector of such lending produced 1.46 trillion yuan ($206 billion).

These off-books lending efforts, though, have a more serious shortcoming than just lack of control by a controlling government: there is little recourse when borrowers default on the loans. Not all of those 9.5% will be defaulted on, but if even a third of those borrowings fail, that would be an even more severe hit to the PRC’s economy.

In contrast, crowdfunding—the process where an individual or private enterprise advertises a venture on a Web site and individual citizens voluntarily commit their own dollars to the project via that site—in the US raised almost $14 billion in voluntary cash payments via just four such Web sites—6.7% of that PRC hidden-debt financing.

Crowdfunding also has a distinct advantage over borrowing, especially when the borrowing is off the books of the lender: default is irrelevant; crowdfunding disburses only the cash actually raised. Think what a population an order of magnitude larger than ours could do with crowdfunding.

Fat chance, though, a government so desperate to maintain microcontrol over every individual citizen would ever afford the population over which it rules the freedoms that unfettered crowdfunding would represent—and fund.