Is China Really Deleveraging?

There's growing evidence that China is finally scaling back its epic borrowing binge. That's important for a lot of reasons, not least for reducing risk and avoiding a financial crisis. The question is whether the government can sustain the pain.

Regulators in Beijing are well aware of the risks that excessive leverage poses, and have tried many times over the years to crack down. Yet they routinely fail to rein in local government officials who get promoted by boosting economic growth, regardless of what systemic risks they may be incurring by binging on debt. To adapt a Chinese proverb: Growth is high and the banking regulator is far away.