China draws debt-fuelled growth line in sand

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Zhu’s argument is straightforward: an over-leveraged Chinese economy cannot afford another round of debt-financed stimulus. Chinese policymakers have been attuned to the risks of a debt build-up since 2016, when the now-infamous “authoritative person” publicly warned that China faced potential Japanisation. Debt-fuelled growth But understanding a lesson is different from acting on it. While China clearly needs to wean itself off debt-fuelled growth, it is less clear why that hasn’t happened yet. The answer lies in the mix of the Chinese debt cycle. Over the first decade of Xi’s leadership, BIS data reveals that growth in corporate debt accounted for...