Is China Running Out of Policy Space to Navigate Future Economic Challenges?

Hunter Clark and Jeffrey Dawson

No 20220926, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: After making progress slowing the pace of debt accumulation prior to the pandemic, China saw its debt levels surge in 2020 as the government responded to the severe economic slowdown with credit-led stimulus. With China currently in the midst of another sharp decline in economic activity due to its property slump and zero-COVID strategy, Chinese authorities have responded again by pushing out credit to soften the downturn despite already high levels of debt on corporate, household, and government balance sheets. In this post, we revisit China’s debt buildup and consider the growing constraints on Chinese policymakers’ tools to navigate future economic challenges.

Keywords: credit; government debt; China (search for similar items in EconPapers)
JEL-codes: F0 (search for similar items in EconPapers)
Date: 2022-09-26
New Economics Papers: this item is included in nep-cna
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