Ep 91 - Beijing’s quiet deleveraging push

About this episode

For the first time in recent memory, a senior Chinese economic official is really pushing the idea that China needs to control its debt-to-GDP ratio. • In a recent Qiushi essay, central bank (PBoC) Governor Pan Gongsheng laid out why credit growth has to slow. Trivium made this call back in July, when deleveraging sounded like a wild idea given how weak the economy is. • Dinny McMahon’s take: “We feel quite validated.” On this quick-reaction episode, Trivium China Podcast host Andrew Polk sits down with Dinny (Head of China Markets Research) to unpack: • The three conditions Beijing needs to enable deleveraging, and why the Iran war and the export boom checked two of them • Where Beijing is already pulling back on borrowing: policy bank bonds, bankers’ acceptances, and special-purpose bonds • Why Beijing cares so much: a debt-to-GDP ratio of 305%, up more than 50 points since 2021, and an aging population that will require borrowing capacity in the future • The “sprint and reset” theory: Beijing is ratcheting investment down to a new base while exports hold up, and Dinny’s verdict that it’s making hay while the sun shines