Still more China construction tightening

Readers will know that we are of the view that China has entered a new round deleveraging and economic restructuring that will crash commodity prices in due course. This plan is two-pronged. It aims to slow the development sector to end overbuilding. And it aims to deleverage local governments as well.

I have already discussed at length that local government borrowing cratered through the first five months of the year, filling just 26% of quotas that are usually exhausted by October. Now Reuters is reporting that Bejing has unexpectedly cut the quotas:

The Ministry of Finance cut the local government borrowing limit from 4.47tr yuan to 4.27tr.
This may indicate that Bejing is increasingly satisfied with growth at current levels.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.