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China seeks balance between growth and debt

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China seeks balance between growth and debt
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China is moving to make its economic growth more balanced and avoid asset bubbles.

It plans to do that by ensuring companies don’t build up too much debt and by further cutting excess coal and steel capacity.

Political obsession with meeting official growth targets has led to years of debt-fuelled stimulus, but now there are fears of a banking crisis or sharply slower growth or both.

Xu Shaoshi, the head of China’s state planning agency, known as the National Development and Reform Commission, said: “The first goal is to reduce debt in an effective and orderly way with companies responding to market forces. The second goal, is to limit the debt of non-financial firms, which must never rise beyond the current levels.”

He said the world’s second-largest economy faces increasing uncertainties in 2017 following speculative growth last year in the housing, commodities and debt markets.

China’s leaders are aware that putting on the brakes too quickly could stall economic momentum.

They’re struggling to strike a balance between supporting the economy with ample credit and slowly trying to defuse the risks posed by the rapid debt build-up.

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