Chinese Authority Puts Kibosh on Debt Fueled Rally

A Chinese official has put out the word: no debt stimulus.

Reuters: China debt-fueled stimulus may lead to recession

China may suffer from a financial crisis and economic recession if the government relies too much on debt-fueled stimulus, the official People's Daily quoted an "authoritative person" on Monday as saying.

The People's Daily, official paper of the ruling Communist party, in a question and answer interview quoted the person as saying excessive credit growth could heighten risks and trigger a financial crisis if not controlled properly.

"Trees cannot grow to the sky. High leverage will inevitably bring about high risks, which could lead to a systemic financial crisis, negative economic growth and even wipe out ordinary people's savings," the person, who was not named, said in response to a question on whether stimulus should be used in future economic policy.

"We should completely abandon the illusion of reducing leverage by loosing monetary conditions to help accelerate economic growth."

Barron's: China’s “Authoritative” Person Sees L-Shaped Growth

On Sunday, People’s Daily published an article titled “Authoritative Person Talking About China’s Economy.” In this article, such person said China’s economic growth is not V- or U-shaped, but L-shaped, and this L-shape will last for “more than one or two years.” In the next few years, the fundamental issues of weak end demand and industrial oversupply can’t be changed. The Chinese economy, unlike in the past, can’t rebound quickly and remain high-speed growth, said this “authoritative” person.

This “authoritative” person seems to suggest Beijing should pare back economic stimulus policies. “High leverage will lead to high risk; if not well controlled, it will lead to systemic financial crisis and negative growth,” People’s Daily reported.