Although the full risks have yet to contaminate the world economy it must be said that the Chinese government has orchestrated the fixed smooth over of concerns many economists cited as persistent problems that threaten to reappear at a later stage.
One of these risks is the consistent additions to an ever growing debt pile used to spur economic activity that's seemingly wearing thin in its appropriateness as a tool to stimulate growth. The current situation in which consumers and producers have burdened themselves up with debt is weighing heavily on their ability to transform income into a value chain.
The taxing demand interest repayments impose on the borrower is far outstripping any good that would come out of it due excessive obligations as a result of an overextension of credit.
Notwithstanding the fact that debt made in the past was done so with the perception of infinite growth at abnormally high rates which don't match present reality. The difficulty in achieving escalated economic expansion requires policymakers to reign in the debt in the short term to medium term and only recommence once satisfied enough has been done.
But considering how indebted China is, roughly 250% of GDP, this would be a mammoth task for any government to achieve in a short span of time. Herein lies where the next frontier of economic thought is going, the Growth Dilemma.
How does a nation abate the long term implications of an action that motivates a short term solution to a dire situation yet leaves its citizens poorer by laddening excessive obligations to their sustanence?
China’s mounting debt is hurting its tradition of using spending and lending to spur growth. https://t.co/3m8dUpcTUy pic.twitter.com/gbNvnHEotP— NYT Business (@nytimesbusiness) July 15, 2016
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