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.

Add to this that Bejing is still allowing both Evergrande and Huarung’s circumstances to deteriorate:

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