Chinese Economists Push Back On ‘Balance Sheet Recession’ Risk
- Borrowing, asset price data don’t support theory, experts say
- They argue monetary policy can still play a role in recovery
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Chinese economists are pushing back against the idea that the economy is entering a “balance sheet recession” like Japan did decades ago, with possible implications for how Beijing will deal with its faltering recovery.
The concept as defined by Richard Koo, an economist at Nomura Research Institute, says that businesses and consumers, spooked by falling asset prices, start to pay down their debt instead of investing or spending in the economy. Last month, Koo said China was falling into a balance sheet recession since households and firms are no longer borrowing.