Could the new Empire of Debt be… China?

The People’s Bank of China extended $37 billion in domestic loans in September, the bank reported today, bringing the total to $1.27 trillion in new loans in the first nine months of 2009. That’s a 136% increase from the same period last year. Total lending in China climbed to 140% of GDP by midyear, says a study by Pivot Capital Management.

It’s hard for us to tell what that really means for the Chinese. But generally speaking, doubling the amount of easy money in just one year tends to inflate a bubble or two. In the same report, the Chinese government said M2, a measure of money supply, rose a record 29% year over year in September.

“China has embarked on a capital-spending bubble the likes of which the world has never seen,” famed short seller Jim Chanos claimed recently. “Buildings are going up with no tenants, roads are built with no traffic, shopping centers are built with no tenants or customers, yet they continue to be built and they continue to be planned.”

Heh, here comes the money shot: “China is Dubai times 1,000, if not a million,” he said. “At some point, all of this (ill-advised) investment will come home to roost.”