The Year Ahead/Finance
The World Will Suffer If China’s Nonstate Economy Runs Dry
Beijing has to find a way to bring down debt without crashing the private sector.
Yarn production at a textile factory in east China’s Jiangsu province.
Photographer: Imaginechina/AP ImagesThis article is for subscribers only.
For the better part of four decades, the rise of China’s entrepreneurial class has seemed unstoppable. Unleashed by Deng Xiaoping’s reforms beginning in the late 1970s, the country’s private businesses have fueled the biggest economic boom in the world.
But what if China’s nonstate sector isn’t as strong as it looks? What if, instead, it’s been pushed along by risky lending and frothy financial markets? That fear, along with concerns about increased government meddling, gripped investors in 2018. As domestic financial conditions tightened, Chinese equities went into the deepest sell-off among major stock markets.