Monetizing debt does not relieve China’s debt burden

CHINA FINANCIAL - Presentation 26 Sep 2017 by Michael Pettis

The relative pick-up in nominal GDP growth and the deflator reduces the cost of servicing the debt in real terms, but households absorb part of the cost by providing borrowers with hidden rate subsidies. Policies involving any form of monetization to manage debt, such as low lending rates relative to nominal GDP, worsen China’s demand imbalance and make the economy more vulnerable to debt.

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