China's economy slows as Beijing wrestles with debt

BEIJING (AP) — China’s economic rebound from the coronavirus pandemic is stalling as President Xi Jinping’s government cracks down on surging corporate debt.

For a decade, the ruling Communist Party has talked about shifting to economy based on spending by 1.4 billion consumers instead of on building factories and apartments. But with each slowdown, Beijing fell back on pepping up growth with more construction and borrowing.

Finally, Xi’s government is confronting the problem by clamping down on borrowing by a real estate industry that supports millions of jobs.

That is sending shockwaves through the economy. Businesses and households are jittery as housing sales and construction slump. That is chilling auto and retail sales. It has possible global repercussions as China buys less steel and other building materials.

“Many customers would like to wait and see,” said Liang Qiming, a salesman for online real estate broker 5i5j.com in Nanchang, a southern provincial capital that was turned into a boomtown by a flurry of construction over the past two decades.

China became the world’s factory, but the bigger power driving its economic boom was a construction frenzy that took off in the late 1990s. Developers and local governments poured borrowed money into blanketing the country with new apartments, office towers, shopping malls, bridges and railways.

Xi’s government appears to be willing to accept a politically painful slowdown to get that debt under control and achieve the longer-term goal of self-sustaining, safer growth.

Beijing “doesn’t want growth at all costs, followed by the likely or inevitable financial market crash, which is very much the sort of European-U.S. model,” said Robert Carnell, head of Asia research for ING.

Financial markets are on edge about...