How will China cope with the big deleveraging challenge?

Since China launched its $600bn stimulus in 2008 as a response to the global financial crisis, investors have waited for the hangover to arrive as debt levels continued to mount.

Each year the anticipated collapse takes a different form. Last year for example investors tensed, expecting a currency crisis driven by capital flight, or perhaps a property market meltdown. Yet with a complex series of reforms, a high degree of state control and no little ingenuity from policymakers, the day-of-reckoning continues to be delayed. In fact, this rather understates China's success. In recent quarters, GDP growth has surpassed expectations, unemployment remains low and economic indicators are largely expansionary. Concerns over a 'hard-landing' have faded, and China h...