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Opinion
William Pesek

Is China Building a Mortgage Bomb?

By making it easier for would-be homeowners to borrow, China could be inflating a massive new bubble.
To prop up growth, the government is easing lending requirements.

To prop up growth, the government is easing lending requirements.

Photographer: Lintao Zhang/Getty Images

The first Chinese interest-rate cut in more than two years is a stark recognition that the world's second-biggest economy is in trouble.

After years of piling ever more public debt onto the national balance sheet, it makes sense to have the People's Bank of China take the lead in propping up gross domestic product. Yet while today's benchmark rate cut should help stabilize growth, the move also adds to worries about looser credit that could pose risks to the global economy. Case in point: mortgages.