According to a report from the Wall Street Journal,"the statement released by the Central Economic Work Conference, the meeting of top leaders, said that China's policy makers faced the "core task" of ensuring stable growth amid continuing economic headwinds and troubles with domestic security".
"The conference comes about a month after a conclave of senior Communist Party officials, called the Third Plenum, set out a blueprint for longer-term reforms. On Friday, the leaders said they would maintain "the spirit" of the plenum, but their focus was on tackling more immediate problems".
"Local governments have been among the big drivers of debt, borrowing heavily to finance infrastructure and real-estate projects that are frequently mired in debt".
"The statement called resolving local debt problems "an important economic task," and said Beijing would "strictly control the process by which governments' raise debt."
Signaling that the central government didn't envision a large bailout, the statement added "every level of government will be responsible for their own debt."
Another reason for the debt buildup is borrowing by firms, often state-owned, despite huge production gluts in industries such as steel, solar energy components and shipbuilding. Over the past few years, as the economy has slowed, many companies are finding there isn't enough demand to keep all their production lines running or their workers employed. Often with the political support of local government, the firms have borrowed to avoid major layoffs.
The leaders pledged to "unswervingly resolve industrial overcapacity"—a pledge that Beijing has made before and failed to carry out. For instance, steel capacity has increased in recent years even as factories have been underutilized.
But Ms. Wang, the UBS analyst, said the leaders signaled more resolve this time by adding that they would also focus "on re-employment of people laid off from industries with overcapacity." Beijing usually does all it can to avoid layoffs, which it fears could lead to social unrest.
Even so, the statement doesn't make clear how much risk Beijing is willing to take to tackle debt and overcapacity. The statement stressed the need for "stable" growth. although a slowdown in credit is likely to lead to a slowdown in GDP growth.
Economists have been looking for signs of whether China would maintain a 7.5% growth target for next year, unchanged from this year, or dial back the target to 7%. A lower growth target would signal that the leadership would press harder to resolve structural problems.
But the document sent mixed messages. Ms. Wang thought the leadership was signaling a 7% target while, RBS analyst Luis Kuijs thought it indicated 7.5%''.
