How debt constrains growth in China

CHINA FINANCIAL - Report 27 Jul 2015 by Michael Pettis
Special points to highlight in this issue: The sustainability of China’s economic model and its dependence on debt has been a controversial topic far longer than it should have been, but while there is now a consensus that Chinese debt levels are very high and may put the country at risk, most economists still do not understand how debt constrains Beijing’s policy options and puts downward pressure on growth. They also do not recognize that the growth in debt was not the result of accidental bad luck but is a fairly mechanical consequence of the existing growth model. Bringing debt under co...

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