Chinese credit growth slowed last month, a sign that Beijing policymakers are balancing pro-growth stimulus ahead of a political transition against the need to address the risk from rising debt.
Economists have warned that growth in debt — especially corporate borrowing — poses a threat to financial stability in China and the country’s medium-term growth prospects. Communist party leaders have acknowledged the risks, but they have shown reluctance to accept the short-term pain that would likely accompany aggressive deleveraging, including lay-off and corporate bankruptcies.
Some analysts had expected that President Xi Jinping would go all out to stimulate growth this year to strengthen his hand as he seeks to place his political allies in key positions at a five-yearly Communist party congress that will convene in November. But the latest data suggest that the parallel need to control debt growth is also influencing policy.