A 'Made in China' global recession?

Every global recession since the Opec oil shocks of 1973-74 was triggered by a contraction in the $17 trillion US economic colossus. The failure of Lehman Brothers, the meltdown in US subprime mortgages, the impotence of the implicit "Fed/Uncle Sam" put, the ice age in the commercial paper and interbank money markets all tipped the US economy into recession in late 2008 and triggered a global economic slump and financial market bloodbath. The impact on the Middle East was catastrophic. Brent crude fell from $148 in July 2008 to less than $40 six months later. There was a depositor run on a major Kuwaiti bank. Gulf property and share prices plunged 50-70 per cent in 2009-11.
Yet as I scan the world of late-summer 2015, I am convinced the next global recession will originate from the $10.4 trillion Chinese economy, whose growth rate has slumped to its slowest pace since 1990. China's trillion-dollar shadow banking system, Marxist-Leninist wealth management Ponzi schemes and Beijing/local government borrowing have built up the biggest debt load in the history of humankind, now a staggering 250 per cent of GDP. The $4 trillion bloodbath in the Chinese stock market this summer has not been amplified by draconian state intervention that included banning sales by strategic shareholders, stock manipulation, price rigging and trading suspensions of listed companies in Shanghai/Shenzhen. Unfortunately, this "Beijing put" will not prevent a Chinese economic bust and history's first "Made in China" global recession.
President Xi Jinping has consolidated more political power than any Chinese leader since the death of Deng Xiao Ping. Yet his frequent purges (not even Politburo apparatchiks, Party princelings or cabinet ministers are immune), economic restructuring and anti-corruption campaign has had a chilling impact on consumer spending/capex at a time when the People's Republic's most savage leveraged stock market bubble has just blown up. Think October 1929 in New York, December 1989 in Tokyo. Not even monetary largesse from the People's Bank of China will prevent a growth decline in China and a "Chinese lost decade" that will transform the global economy, asset prices, power politics and financial markets.
China had periodic boom bust cycles/cash crunches in the 1980s and 1990s, the reason the Big Four banks were recapitalised by the Communist Party thrice in a decade under Premiers Zhu Rongji and Wen Jiabao. Yet China's domestic economic convulsions had minimal global impact since China's economy had not yet joined the World Trade Organisation, or become $10 trillion monster that is the largest export destination for 40 countries worldwide, the world's largest importer of copper, coal and steel. In 2014, China contributed 38 per cent to global growth. As the vicious bear market in crude oil, Dr Copper and iron ore ($190 a metric tonne two years ago, $48 now), the Middle Kingdom is going bust. History will rank the Chinese stock market bubble in 2014-15 in the same league as Kuwait's Souk Al Manakh crash, Dutch tulip mania, the Nikkei Dow bubble, dot-com craze in late-1990s Silicon Valley or the Jazz Age financial madness on Wall Street. Only the Chinese bust will trigger a global recession.
This is the deflation SOS flashed by West Texas crude, Dr Copper, Brazil, Taiwan, South Korean industrial production/exports and the Australian dollar. Readers of this column know I have been consistently negative on emerging market commodity exporters since 2012 while the poor souls who believed in them lost vast fortunes as punishment for their collective macro idiocy.
An asset class where the Russian rouble, Columbian peso, Brazil and Turkish banks all fell 30 per cent in 12 months is an asset class in deep financial distress - and the global recession has not even begun. JPMorgan was so right: "Liquidity is like a cab on a rainy night. It disappears when you need it the most." The liquidity shocks will come when the Yellen Fed raises rates amid China's hard landing.
This is the 1998 scenario all over again for emerging markets. Currency depreciation means squat when world trade shrinks. I expect corporate defaults (Walter Energy just filed Chapter 11), stock market crashes, commodities meltdowns, bank failures as the malign ghosts of 2008 are resurrected to haunt Wall Street. This time the wolf is here and wolf is from Beijing.