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China: Four Major Obstacles to Growth
China’s economic challenges have never been more pressing, and for that reason, PIMCO’s forecast for the official growth rate this year is below consensus at 5.5%-6.5% and below China’s own target of 6.5%. In arriving at our forecast, we focused on four major headwinds to growth. • Leverage. Since 2007, China’s economy has added over $21 trillion of debt – more than one-third of the world’s debt. However, the amount of growth that each new dollar of debt is generating has been declining, such that if nominal GDP expands close to the government’s target this year, then China will need to add a minimum ... (full story)