China takes tough stance on over-levered sectors

Grown up comments from China this morning. The State Council has issued a statement saying that the government would “cut off credit to force consolidation in industries plagued by overcapacity as it seeks to end the economy’s dependence on extravagant investment funded by cheap debt.”

In other words rather than extending and pretending with still more liquidity injections into zombie banks and companies and continuing to bolster bad managers and habits, Chinese officials are saying they will now stand down and let the creative destruction of math and business principles do some much needed systemic cleansing. Wow. Would that the rest of the free world would become so pragmatic…we could be through the near-term pain of consolidation and on to true organic recovery at last.

See: China signals will cut off credit to rebalance the economy

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