The Paper Dragon solves the problem...

...so we have visual confirmation of what were previously merely optical backstops.  This of course "solves" nothing and the massive imbalances continue to weigh on internal stability.  It is one thing to have a few million people living in poverty, as in the United States...but inequality scales heavily with population.

1.2 Billion angry Chinese await the eventualities here.

The cost of insuring China’s bonds against non-payment fell the most since September and debt linked to municipalities gained after the bailout of a troubled trust product averted a default that may have spooked markets.

Credit-default swaps protecting Chinese sovereign bonds for five years slid nine basis points, or 0.09 percentage points, to 96 yesterday in New York, according to data provider CMA. The average yield on five-year notes rated AA, the most common grade for so-called local-government financing vehicles, dropped two basis points to 7.58 percent, the biggest decline in more than two weeks, ChinaBond figures show.