China’s Balancing Act
China is now struggling with a dilemma common to all advanced credit booms: the longer the boom runs, the greater the danger of wasted investment, huge bad debts, and a major financial crisis. And, though China enjoys more room for maneuver than other countries facing similar credit booms, the risks remain serious.
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NEW YORK – China’s slowdown is the biggest short-term threat to global growth. Industrial value added fell in August, credit growth has slowed dramatically, and housing prices are falling, with sales down 20% year on year. Given stagnation in the eurozone and Japan’s uncertain prospects, a Chinese hard landing would be a big hit to global demand.