Investors sometimes talk about a ball of speculative money that rolls around China’s asset markets. There’s a ball of worry too, and it is rolling back into local government debt. The immediate concerns are about Guizhou where the authorities have been making unusually public appeals for help, but they aren’t alone in feeling under pressure. Today’s Politburo statement signals that they should get used to it: control of hidden local government debt is back as a priority. As with efforts to deleverage the property sector, there are no quick fixes. But constraints on borrowing will inevitably drag on growth.
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