The State of China’s Deleveraging

Deleveraging is real. Beijing’s battle against financial risks has had significant effects on China’s economy, but has primarily impacted asset growth at smaller banks and non-bank financial institutions (NBFIs), rather than debt levels at state-owned enterprises (SOEs). The deleveraging push has also accelerated a dramatic shift within banks’ lending patterns, toward households and away from corporates. The focus will shift toward SOE debt later this year, and toward regulatory tightening measures, while more credit events and defaults will be necessary to break the root causes of leverage growth.

Posted January 23, 2018
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