The latest Bloomberg Businessweek offers more evidence that the bloom is off the rose of China’s state-controlled economy.

[O]ne figure is going in the wrong direction: China’s corporate debt has risen from 108 percent of the entire economy last year to 122 percent in 2012, its highest level in 15 years, estimates GK Dragonomics, a Beijing-based economic consultancy. That makes China’s corporate sector one of the most debt-laden in the world. “Companies have seen their business slowing down and revenues were not what they had expected. They have bridged the gap by taking on more debt,” says GK Dragonomics Research Director Andrew Batson. …

… Complicating matters is that many of the heavily indebted companies are state-owned, and the banks that lent to them are state-controlled, too. That means the government may have to pick up the tab if any of these companies is unable to manage its debt. The sudden bankruptcy of a giant state corporation would have political as well as financial consequences. This implicit government guarantee behind a portion of China’s corporate debt means the government’s actual obligations are likely higher than the 49 percent figure estimated by GK Dragonomics. Lump together corporate, public, and household debt, says the research firm, and you get a figure close to 206 percent of GDP.