Taming the dragon

China’s heavily indebted real estate market threatens to burn down the economy. Will government stimulus be enough to save it?

Economics | Chinese de-leveraging

Chinese real estate developers have been dropping like flies. They spent the last few decades binging on debt and are loaded with it. The country is now battling to prevent debt deflation, where asset prices fall as debts rise. Can China stop the economy from circling the drain and avoid a deflationary spiral? The answer will depend on whether the government can prop up the real estate market enough.

The Chinese economy is drowning in debt. The country's debt levels are dizzying but stagnant. Private sector borrowings are a whopping 228% of gross domestic product (GDP). Most of which is on corporate balance sheets—non-financial companies owe 166% of GDP.