The People’s Republic of China’s debt-fueled economic growth is threatening to hinder continued growth, even to cause serious contraction for the PRC’s economy. Much of that debt is local government off-the-books lending and, especially,

The deterioration of China’s real-estate market in the past three years meant local governments could no longer rely on land sales to real-estate developers, a significant source of revenue.

There’s another problem with that last, though, that makes off-the-books debt issuance even dicier for those local jurisdictions. The local governments own, or owned, only a finite amount of land, and so there is an upper bound to the amount they can sell to those developers. It’s very much akin to feudal Europe, where parents, over a very few generations would subdivide their land to give some to their eldest sons to use and profit from—and then ran out of land to subdivide. It was worse for the kings, who gave away royal lands to eldest sons and to nobles as rewards or loyalty purchases. The kings ran out of land, also.

Kings and local PRC governments could repossess those lands on one or another pretext, but such moves were, and are for the PRC governments, fraught with political danger. In the PRC’s case, the land limits, as much as any market for real estate, meant that borrowing against that collateral becomes even more risky, as the land collateral becomes smaller, along with the constructed buildings becoming expensive to hold on inventory pending sales that aren’t happening.