China’s surging credit in August boosted property sales while barely moving the dial on private investment, underscoring the challenge for policy makers striving to support growth while reining in debt risks.
Aggregate financing jumped to 1.47 trillion yuan in August ($220 billion), helping fuel a 39 percent jump in property sales by value in the first eight months. Medium and long-term new loans, mostly mortgages, climbed 528.6 billion yuan. Private investment in fixed assets, meanwhile, stalled at 2.1 percent for a second straight month in the January through August period, matching a record low.
Months after an unidentified ‘authoritative person’ told the Communist Party’s People’s Daily newspaper that China must face up to risks associated with soaring debt levels, policy makers are grappling with how to do that without growth slipping below a target of at least 6.5 percent. At the same time, there’s scant evidence of progress on pledges to rein in excess capacity in industries from steel to cement that are at the center of President Xi Jinping’s efforts to restructure the economy.
This post was published at David Stockmans Contra Corner on September 15, 2016.