The Chinese government just announced a 6.5% to 7% growth target for 2016 at the weekend’s National People’s Congress, as leaders emphasize growth while trying to avoid asset bubbles and debt inflation.
Most of China's growth over the past two decades has come from state-led investment and debt, leading to concerns about a credit build-up as the economy has slowed, the Wall Street Journal reports.
One observer fears China's current crisis could lead to four times the carnage of the Great Recession.
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The credit frenzy has meant growing financial liabilities at Chinese firms, which sit at 160% of GDP—a jump from '08's 98% and far above the 70% for US firms.
All this credit has Moody’s slashing its outlook for China’s sovereign debt, as bad loans climbed to 1.67% of bank portfolios by the end of 2015. In response, Chinese Premier Li Keqiang said there will be upcoming tax cuts to ensure companies have money to invest.
The Chinese government also specified total social financing—a broad measure of credit, including both bank and non-bank lending—as a metric for monetary policy. [WSJ]
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