China’s mountain of debt, explained

Debt is the economic scourge of our time.
First it buried American banks and mortgage holders. Then we learned that euro zone governments such as Greece, Portugal and Ireland were in hock over their heads. Japan’s debt is twice the size of its annual economy. And in Washington this month, Republicans and Democrats are engaged in brinksmanship over the American taxpayer's $14 trillion hole. 
Through it all, China has been seen as the stalwart of financial prudence. But we now know that the country faces its own challenges. 
As GlobalPost has reported in the past, China's banks have been engaging in risky “off balance sheet” lending somewhat reminiscent of Enron’s shenanigans. Last week, Beijing released a national audit revealing that local governments owe an estimated $1.65 trillion in outstanding loans. This week, Moody’s has indicated that the problem is significantly worse, by as much as $540 billion. And that's only local government debt. It doesn’t include the central government’s huge obligations, or those of banks that are essentially guaranteed by Beijing.
Even for a miracle economy like China's, that’s a lot of debt.
To put this in perspective, GlobalPost interviewed Victor Shih, an expert in China’s economy, who has been following the debt situation closely. Shih, an assistant professor of political science at Northwestern University, holds a Ph.D. in government from Harvard. (The interview has been condensed and edited by GlobalPost.)
GlobalPost: Put this in perspective for us: How much debt does China have?