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New Signs Show that China is Sracking Down on Debt Again

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Data for the year so far show signs that China is starting to crack down on debt. A firstquarter survey by the China Beige Book released Thursday found that borrowing by stateowned enterprises dropped to the lowest in the studys roughly 10year history. Overall borrowing fell to its lowest in three years, while that of large firms hit a fiveyear low, the report said. Given ties to the state, the governmentlinked companies are the best signal on authorities policy intent, China Beige Book Managing Director Shehzad Qazi said in a note. The company conducts quarterly surveys of businesses in China. Economists note Chinas relatively low GDP target of over 6 this year gives policymakers the ability to address problems such as high debt levels, without needing to worry too much about growth. Prior to the coronavirus pandemic last year, China had attempted to curb that debt growth with mixed results.

While Qazi noted more quarterly data will be needed to tell whether China has fully gone into deleveraging mode again, there are other signs that authorities are trying to control debt. Chinas debttoGDP ratio rose to 285 as of the end of the third quarter of 2020, up from an average of 251 between 2016 to 2019, according to a report Monday from Allianz, citing analysis from its subsidiary Euler Hermes. Although that debttoGDP ratio has not declined, it has stabilized, senior economist Francoise Huang said in a phone interview Tuesday. Stabilizing is already a good sign and probably…

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