China's Bill Will Have to Be Paid

On Tuesday night, Moody’s Corp. downgraded China’s sovereign credit rating for the first time in 28 years. In doing so, the rating agency is acknowledging the dragon in the room: China will have to pay the price for its epic debt binge, whatever policymakers do from here.

The burning question in China these days is whether the government is serious about tackling the debt pile that’s exploded since the global financial crisis. Total outstanding credit grew to around 260 percent of GDP at the end of last year, from 160 percent in 2008 -- one of the biggest and fastest expansions ever. Officials say they’re keenly aware of the need to deleverage, and there’s evidence that recent efforts to deal with the problem are starting to have an impact. What’s uncertain is whether the government has the will to push ahead with reforms even as companies start to default and the economy slows.