China’s debt has soared over the past decade as banks and other lenders, working at the urging of Beijing, turned on money spigots to fuel growth. That has led to worries about the stability of the financial system powering the world’s second-largest economy.
Chinese debt accumulation had slowed in some recent quarters, suggesting that the country’s leaders were getting a handle on the problem. But some Western experts are skeptical that China has really done much.
“While recent policies to contain financial risks have slowed the pace of debt accumulation, China has yet to achieve stabilizing debt ratios, and is farther still from outright deleveraging,” Andrew Fennell, the director of sovereign ratings at Fitch Ratings, wrote in an email.
Building Boom
Addressing the Communist Party Congress on Wednesday, Mr. Xi told officials, “Real estate is for living in, not for speculation.”
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Plenty of people in China apparently feel otherwise. Surging prices in cities like Beijing and Shanghai have led some consumers to feel prosperous but have raised concerns about housing affordability and the potential for sudden drops. Chinese officials have worked in recent months to limit housing-related financing in the biggest cities, among other steps to stop the surge.
It is not just housing. A strong increase in fixed-asset investment last month reaffirmed the central importance of construction that includes roads, bridges and other infrastructure. Considerable building has come from local governments, which contributed heavily to China’s current hefty debt load.
Zhou Xiaochuan, the long-serving governor of the central bank, warned in a speech in Washington on Sunday that a large chunk of the debt accumulated by Chinese state-owned enterprises might actually represent disguised borrowing by local governments.
“Chinese local governments borrowed money from various financing platforms, which caused relatively too much debt,” he said.
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Trading Up
China can thank the world for some of its third-quarter performance. Its exports grew at a healthy pace as a global economic recovery improved demand for Chinese-made goods.
Of course, China’s economic success is partly built on exports. Yet China can no longer compete on costs against cheaper countries as its workers demand more. China is trying to shift to manufacturing more valuable products, which would help it develop its economy and nurture a new generation of more sophisticated, technically adept workers.
China also bought up more of the world’s products during the quarter. Its imports grew faster than exports, thanks in part to China’s stronger currency, which gives consumers more firepower when purchasing things from abroad. That also signals that many of China’s consumers feel comfortable spending money.
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Article source: https://www.nytimes.com/2017/10/18/business/china-economy-gdp.html?partner=rss&emc=rss
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