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Li’s Balancing Act

SHANGHAI – Three years of persistent economic slowdown have rattled Chinese economists and policymakers. Financial analysts are in a tizzy over whether GDP growth will fall below 7%, parsing official statements for clues as to whether and when the government will act.

The government’s financial viziers seem none too alarmed. Beneath this cool exterior, however, China’s leaders are very worried indeed. As Liu Shijin, Vice Minister of the Development Research Center of the State Council, recently explained, the dilemma facing the authorities is that another massive stimulus plan to boost growth would mean more outstanding credit – a problematic approach, given the enormous debt and financial risks that local governments have accumulated. But an excessively sluggish economy poses its own risks.