Financial Times: China’s Balancing Act on Debt Is Becoming Trickier

Some factories in China are paying workers to stay home, part of a plan to ease the nation’s serious debt levels – which has grown nearly fivefold over the past decade to $29 trillion today. “The debt, equivalent to 260 per cent of gross domestic product, has brought with it dramatic declines in credit efficiency,” explains the Financial Times. “The International Monetary Fund points out that in 2016 it took four units of credit to raise GDP by one unit. A decade ago the ratio was 1.3 to one.” The debt is largely held internally within China, but that can create its own imbalances, and corporate debt is especially high. The Chinese government has taken steps to control the debt levels, but must continue to stay disciplined in regulating loan growth, industrial capacity and shadow banking. Such moves will slow growth but avert crisis. – YaleGlobal