| They're in a situation where they need to dramatically slow down debt accumulation, which will slow down economic growth a bit faster than otherwise anticipated. It's a whiplash action, going from the growth the last 20 years (in which people were aggressively encouraged to move into the cities) to needing to strictly control that growth and the correlated debt expansion. Manufacturing stopped net expanding years ago, many of their largest state-corporate manufacturing enterprises are simultaneously loaded to the ceiling with debt and being heavily subsidized to maintain current levels of employment and output. There is wide discussion about local governments being allowed to go bankrupt, because the debt burdens have gotten so extreme: "China Central Bank Official Says Bankruptcy May Benefit the Country" https://www.bloomberg.com/news/articles/2017-12-25/pboc-offi... China's goal, in theory, is to transition increasingly to a services economy, to provide the next leg of its growth, as manufacturing can't provide that. Service economies grow far slower than the type of manufacturing fill-in-the-slack / join the WTO boom they saw from ~1992-2015. They can no longer afford to keep accumulating debt as they have been since 2007. S&P is forecasting another ~75% increase in their total debt position in just the next five or so years, which would push them to... ~550%-600% debt to GDP ratio (possibly worse when counting all the shadow debt), or nearly twice that of the US. It's untenable to say the least. Bottom line: China has to start applying the brakes, and that likely means dramatically slowing the migration into the cities. That migration is unsustainable if China has to slow its debt expansion (which it does). It takes extraordinary perpetual economic expansion to provide enough jobs for all of those people and pay for the infrastructure demands. China's financial reserves haven't kept pace with either their debt or GDP growth, with about 3/4 of those reserves untouchable. Their ability to continue to finance the wild debts that have gone with the local government & infrastructure splurges, is heavily restricted now (if cities like Shanghai or Beijing want to add millions of more people, it'd require continuing to fund all of that while the overall context gets more shaky). |