ASSESSMENTS

A New Year, but No Resolution for China's Debt Problem

Jan 27, 2018 | 14:53 GMT

A billboard in Beijing advertises a real estate development.

A woman wearing a mask walks in front of a property advertisement billboard in Beijing on Dec. 9, 2016. 

(NICOLAS ASFOURI/AFP/Getty Images)

Highlights

  • After some initial progress in managing their country's mounting debt in 2017, Chinese authorities may have to temper their expectations this year.
  • A slowdown in the property market could strain China's finances and disrupt Beijing's efforts to reform its unwieldy and unprofitable state-owned enterprises.
  • Surging household debt will interfere with the central government's quest to encourage domestic consumption and rebalance the Chinese economy.

Last year was kind to the Chinese economy. Robust growth enabled the government to make headway in its efforts to contain China's mounting debt, address overcapacity and wean the economy off a credit-heavy investment model. But whether Beijing can keep up the pace of progress in the new year is uncertain. As U.S. President Donald Trump prepares to deploy more aggressive trade measures against China, he could challenge the stable trade environment that facilitated the country's economic recovery in 2017. And as the vital real estate market continues to slow down and debt keeps piling up, the central government may have to expend more resources to maintain stability. ...

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