China is reportedly having second thoughts about cracking down on country’s ballooning debt

China is planning to relax its goal of cutting debt in its economic outline that’s set for release Wednesday, The Wall Street Journal reported.

The revised plan will instead clamp down on the rise in borrowing, sources told the WSJ. The move would fly in the face of the Chinese government’s mission to bring down the country’s soaring debt, a goal President Xi Jinping has made a cornerstone to his economic platform.

The weakened priority may prove to be a concession by top Communist Party leaders that China’s economy may be more reliant on leveraged growth than the government would like.

The Journal added that, by cooling its stance on debt, Beijing is hinting that it would rather fuel growth with higher debt than pursue austerity measures.

Chinese debt levels jumped the most in four years in September, according to Reuters. There’s speculation that the size of China’s debt load may be three times its economy.

China may be feeling pressure to keep its economy growing as the U.S. is set to pass its biggest tax overhaul in 30 years this week, which will lower the corporate tax rate to theoretically make more companies competitive with China.

To be sure, Xi and the Communist Party have been hard at work to curb borrowing between banks, the Journal noted. But since the crackdown on intrabank lending, smaller banks have scaled risky borrowing.
Source: CNBC