What a China U-Turn Would Mean for Global Growth
Beijing is fretting that a recent lending boom is exacerbating problems in an already overloaded financial system
The other bubble of late in the commodities futures market, is deflating quickly as regulators place borrowing curbs on investors using cheap debt to bet on things like rebar and soybeans. Global commodity producers pinning their hopes on China yet again look set for disappointment.
A lengthy interview published Monday in the official mouthpiece People’s Daily with an unnamed high official gave voice to these concerns. It noted the diminishing returns on the use of monetary policy and increased lending to steady the economy.
It called for less debt, more reforms and culling of overcapacity, the kind of moves likely to cause growth to slow before it pays dividends in a healthier long-term economy. The person cited in the article said deleveraging should happen from debt growing slower, not from gross domestic product growing faster.
The public airing of such views in the least shows there are major disagreements among top officials. Or it could signal that an antidebt, reformist faction of the government is again on top, and the opening of the lending spigots will now reverse.
If the latter is the case, then before too long, talk of slowing China will again be a source of market trouble.