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China’s Economy Slowed by Excess Debt

China’s Economy Slowed by Excess Debt

Chinese policymakers are in a bind—on the one hand they want to cut capacity from the country’s worst-performing sectors, and on the other, they need to curb credit excesses in recovering sectors without grinding the economy to a halt.

Industrial output, retail and investment metrics all missed estimates in April, Bloomberg reports. And despite the Chinese government’s quick reassurance that it will pursue monetary policy to support the economy, the poor results reveal just how reliant Chinese growth is on debt.

Because of that, when credit moderates, so too does China’s economy. Only policy-driven sectors are doing well, namely infrastructure and real estate, leaving the world’s second-largest economy stalling and held back by debt. [Bloomberg]