China Markets

Mind-Boggling Local Government Debt Dynamics Should Probably Worry China Watchers In 2020

Much like China's labyrinthine shadow banking complex, this is a laughably (and notoriously) convoluted setup.

China will set a lower growth target in 2020, according to policy sources who spoke to Reuters for a weekend piece. "We aim to keep next year’s growth within a reasonable range, or around 6%", one unnamed source said. That's lower than this year's 6-6.5% range. Beijing will reportedly lean on infrastructure spending to bolster activity. That sounds like a mundane story, but it's not. Growth was the most sluggish in decades this year, as the trade war undercut the economy at a delicate juncture. For years, China has attempted to walk a kind a tight rope, balancing a deleveraging push aimed at de-risking a tangled shadow banking complex, with ensuring that productive credit to the real economy keeps flowing. At the same time, the country is marking a difficult transition from a smokestack economy to a more sustainable, consumption-driven model. Throw in the economic liberalization push and attendant pretensions to allowing market forces to play a larger role in determining winners and losers, and you're left with a Herculean challenge. The new growth target will be officially unveiled in March, at the annual parliamentary session, but it was approved by the Party leadership
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