Coming clean

AS ANYONE who has conquered addiction knows, the first step is admitting that you have a problem. China, hooked on debt for much of the past decade, may be reaching that point. In recent weeks officials have talked at length about the country’s troubling reliance on credit to fuel growth. They have also sketched out a range of possible solutions. It is only a start—withdrawal symptoms in the form of defaults and slower growth are sure to hurt, and could yet prompt a relapse. But the new tone is encouraging nonetheless.

The frankest admission came in a front-page article in the People’s Daily, mouthpiece of the Communist Party, in early May. An anonymous “authoritative person”, widely believed to be Liu He, an economic adviser to President Xi Jinping, warned that high leverage could spark a systemic financial crisis. China’s total debt load jumped from less than 150% of GDP in 2008 to more than 250% at the end of last year. Increases of that size have presaged economic trouble in other countries.

Last month the government convened its first news conference on the topic, bringing together…Continue reading

This post was originally published in the Economist.

Coming clean

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s