Reuters
- China’s economy has started to slow dramatically, even before US tariffs have had a chance to make an impact.
- The government is scrambling to boost growth and walking back some of the measures it took to rein in debt and credit creation.
- This means it is once again encouraging infrastructure investment — one of the biggest drivers of China’s debt bubble in the first place.
- Beijing knows this is risky, and an analyst at Societe Generale says that by 2019 it could lead to the full return of shadow government borrowing and/or shadow banking.
The Chinese economy has yet to feel the pain of US trade hostility, but it is slowing dramatically, to the alarm of government officials.
That means the government must once again stare down the Catch-22 of modern Chinese economics. Should it continue to crack down on easy credit and shadow financing to fight the massive debt bubble that’s been building since the global financial crisis, or should it loosen the reins in order to keep the economy growing at about 6.5% regardless of any instability tariffs might bring?See the rest of the story at Business Insider
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