Household Debt: To Spur Consumption, Less is More

Conventional wisdom says that when the household sector borrows more, they tend to spend more as well. But the logic in China currently operates in reverse: household leverage is already too high and is siphoning off consumer spending, not boosting it. Rebalancing to a consumption-driven growth model requires reducing household leverage, particularly from mortgages. Renewed tightening measures targeting the property market move in the right direction, but Beijing’s tolerance for short-term economic pain will be tested again.

Posted August 22, 2019
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