Regulatory crackdown poses risks to growth, financial stability

The ongoing regulatory crackdown on banks’ off-balance-sheet activities has contributed to the mild slowdown in growth we’ve seen recently. But it is also bringing into focus the challenges that China’s policymakers face in putting credit growth onto a sustainable path. With credit having expanded so fast for so long, reining it in without triggering financial instability and a further slowdown in the economy will prove extremely hard.