China's National People's Congress (NPC), which concluded Wednesday, didn't do much to ease the main worry about the world's second-biggest economy: its large and growing pile of debt. In fact, to keep GDP growth ticking over at 6.5 percent or more, Premier Li Keqiang pledged a 12 percent expansion in credit this year. That implies about $2.7 trillion in new lending — larger than the United Kingdom's GDP.
That's not as troubling as it sounds, however. The reality is that China is a big economy, with a substantial stock of existing borrowing and a valid need to borrow more if it's to prevent demand sputtering out. No one should be surprised China's borrowing needs in 2017 look to be immense. They'll be even larger in 2018 and bigger still in 2019.
Indeed, it would be more worrying if China suddenly stopped borrowing so much. True, Chinese leaders should kick the habit of rolling over nonperforming loans and instead kill off more zombie companies, especially in the state sector. Shock treatment, however, wouldn't result in a more dynamic industrial sector or more efficient banking system. More likely, a sudden halt to lending would lead to an economic collapse and financial meltdown — with global implications.