Still unbalanced, still unsustainable

Despite repeated talk about the need to rebalance China’s economy over the past decade and a half, there has so far been little meaningful reduction in its dependence on investment and on exports. In fact, repeated efforts to shore up short-run growth mean that officials have actively resisted rebalancing, causing reliance on debt and state spending to keep climbing. One form this has taken recently is government intervention to keep construction activity unsustainably high. The upshot is that China is still due for a painful structural adjustment. When it comes it will almost certainly involve a further slowdown in growth.