What comes after the debt binge?

China's reporting of unexpectedly soft data continued in May. The annual growth rate in industrial production, which measures output at factories and mines, fell marginally to 9.2%, the weakest rate since last September. Electricity output growth, a widely watched industrial barometer, slid to 4.1% year-on-year compared to 6.2% in April.

Import and fixed asset investment growth were at their weakest since last August. Property starts were down on last year. Exports barely rose. Producer prices are falling at an annual rate of 2.9%. Last year China grew by just 7.8%, the slowest pace in 13 years.

What the commentators said

With no sign of an imminent uptick, the government will come under pressure to launch another stimulus package, as Bob Davis pointed out in The Wall Street Journal. But China has just been through a state-mandated credit binge that fuelled a property and infrastructure bubble, and leaders will be reluctant to turn the taps on again. Having gorged on debt once total credit in the economy has shot up to an estimated 200% of GDP in recent years it will be harder for the economy to generate growth from borrowing and the banking system is already riddled with bad loans. Now the worry is that China is heading for a nasty crash. Everyone has got used to seeing China as a "spectacular success", said Satyajit Das in The Independent. But that "could end in surprising failure".

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