As Bloomberg noted at the time – and as we’ve discussed extensively – Beijing is facing the virtually impossible task of trying to de-leverage and releverage at the same time.
“Various parts of the government don’t always seem to be working from the same playbook,” Bloomberg observed, before quoting Credit Agricole’s Dariusz Kowalczyk who pointed out the “obvious contradiction between attempts to deleverage the economy and attempts to boost growth.”
Indeed, there are times when the scale seems to tip in favor of deleveraging.
For instance, Beijing has recently shown a willingness to tolerate defaults and the case of Baoding Tianwei Group Co even suggested that in some instances, state-affiliated companies may not receive immediate government support.
Nevertheless, the abrupt 180 on LGVF financing and the transformation of the local government debt restructuring initiative into the Chinese version of LTROs betrays the extent to which China is still reluctant to deleverage its economy in the face of flagging growth.
Against that backdrop we bring you the following graphic from Bloomberg which breaks down China’s massive debt pile and shows the degree to which it’s grown over the past decade.