Rebalancing, Deleveraging and Sustaining Growth in China

The Chinese economy is facing some critical challenges in the recent years. As it rebalances the economy away from investment and toward consumption, output growth has slowed down and the corporate sector struggles with falling profitability and increasing debt. On the other hand, the efforts to rein in credit expansion and deleverage have yielded limited success. This article analyzes China’s debt issue— the causes, patterns, and possible consequences of debt accumulation. Based on the analysis, this article provides a critical assessment of the current policy measures in dealing with rebalancing and deleveraging and proposes some alternative policy actions.