News about China's debt came creeping back into focus this week as a report from Goldman Sachs stated that China's reliance on debt has "increased significantly".The report went on to say that the nation's debt load is far higher than people think. How much credit has already been extended to Chinese households and corporates?

Well, the Goldman report agreed that it is difficult to determine, in particular because the government numbers that are in question don't offer much transparency which makes the risk modeling difficult.

Part of the problem is due to Chinese banks engaging in gaming the regulatory system, Goldman noted. This off-balance sheet lending by financial institutions, which Goldman calls "shadow lending," is part of their issue that is raising concerns.

Now none of this is meant to mock, or "cry foul" at the Chinese people or government. Considering that the US government stopped declaring how much money it prints years ago, its safe to say that lack of transparency is abundant around the globe. But back to the report, there are several questions that have arisen as a result of attempts to make the ultimate determination regarding how much credit has in fact been extended to the Chinese economy.

Goldman admits that it cannot answer some of these questions about the Chinese credit system:

1.How large is the system-wide size of "opaque loans".

2.Besides the "opaque loans" held on banks' balance sheet as part of investment assets, how much additional credit is extended off banks' balance sheets?

3.To what extent is shadow lending (i.e., the on-balance sheet opaque loans plus off-balance sheet credit) already captured in government reported data?

Starting to get a little complicated, no?

So to figure some of this out Goldman uses a reverse engineering to get their China debt answers. Their approach follows where "money" from households and corporations gets invested and aggregate the size. The report states "This is akin to tracking the flow of funds for households/corporates". "

Here's where we hope Goldman is wrong. The China debt measurements numbers indicate just under $20 trillion in total credit outstanding. Using Goldman's adjusted money flow measure, however, that number jumped significantly recently and is closer to $27 trillion.

As you can tell by the tone of the report, some of the findings decidedly worry Goldman. The implied credit metric and its rapid rise recently "indicates that the trend of China's leverage has probably deteriorated faster than we previously thought, even though we had already expected the ratio to continue rising in the next few years."

This suggests that the economy using credit as a crutch has "deepened significantly" and the sizeable flow of credit on needs to continue on a persistent basis to maintain a stable level of growth.

The bottom line is that, admit it or not, the world has a debt problem and no one can predict how it will all resolve itself. Just know that there is saying, "If China sneezes, the world catches a cold."