China Will Start Fixing Debt Problems Sometime Before 2021

NYTimes: China Will Tame Its Growing Debt Load in 3 Years, Top Xi Adviser Says
Speaking to attendees at the World Economic Forum, the adviser, Liu He, said that the Chinese government planned to bring its debt under control within three years. Mr. Liu said Beijing intended to focus on reining in the growth of debt among local governments and companies.

“We have full confidence and a clear plan to get the job done,” he said.
Last time they tried was in Xi's first term. They aborted the attempt in 2015 and 2016. A massive increase in debt was needed to offset the downward pressure from reigning in credit growth. All else equal, the economy will slow more than before due to the increased debt load. It's simple mathematics. Credit money spends the same way as the existing money supply. A modest slowdown from current credit growth levels will shave points off of GDP growth. Downshifting credit growth to rates similar to the United States and Europe (relative to GDP growth) would cause a significant slowdown in GDP growth.

Nothing is getting better for China. Global growth is still on a downward trajectory and its increasingly tied to their own credit cycle. More importantly, as social mood remains in an overall downtrend in the West, ideas such as protectionism are gaining ground every year and will increase strongly in the future. Moves that might have elicited support in prior years, such as currency devaluation or shifting the pain abroad through increased exports will invoke retaliation. Export moves could face penalties that exceed 100 percent initially. Multiples of that if trade wars or tit-for-tat retaliation unfold.

Alhambra: The Dismal Boom

The story is the same in most of the world. Growth isn't what it used to be and requires greater amounts of credit to overcome. China was the main source of that credit growth for the 2016-2017 boomlet. If it is truly over, then global growth will go with it.

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