For parents who have been enjoying the freedom of living child-free, now comes research to spoil it all
The bedrooms have been redecorated in grown-up colours, the 25-year-old soft toys chucked out, the washing machine is blissfully underused and, thanks to the apparent current raging addictions of baby boomers, a holiday or two – cruising in the Med, the Antarctic, anywhere that avoids dry land – have been booked. And then they’re back.
According to a recent study by the London School of Economics (LSE), adult children who return to the family home after a period away – often at university – cause a significant decline in their parents’ quality of life and wellbeing.
When the chancellor Philip Hammond sits down on Tuesday after delivering his first spring statement – the streamlined replacement for what we used to call the budget – one man will be greatly in demand, popping up on every media outlet to tell us what the figures on borrowing levels and the projected deficit really mean. That man is Paul Johnson, director of the Institute for Fiscal Studies (IFS). I suggest to him that his official role is to pour a bucket of cold water over Hammond’s head, and he doesn’t disagree. “Economics is the dismal science, after all,” he says.
Happily, 51-year-old Johnson is not at all dismal. He is clever, sparky and down to earth – probably because he sees life through the lens of a father with four demanding sons going through the education system. He crunches all the numbers, but he also understands the personal stories behind those numbers. He has written about how his dyslexic second son has battled through further education and been disappointed by the threadbare nature of Britain’s vocational training system. That, in turn, informs his critique of a society unduly preoccupied with universities and graduates. Johnson, despite a mildly nerdy manner, is the opposite of the ivory-towered academic.
The idea of the spring statement, with the budget now pushed back to autumn, is to tell us where we are financially, and to kickstart consultations about the long-term fiscal challenges facing the UK. That, for Johnson, is the important bit. If the spring statement works, it is an opportunity to counteract the short-termism that bedevils British politics and to start thinking about the issues that really matter – the ageing population, the buckling health service, the lack of any coherent plan for social care, the fact that soon taxes are going to have to rise or public services will fall to pieces. There comes a point when you can no longer kick the can down the road because the road is no longer usable.
The Office for Budget Responsibility numbers cited in the spring statement will be better than those projected last autumn because tax receipts have been higher than anticipated, and Johnson reckons Hammond will indulge in some self-congratulation for having met the government’s austerity targets (albeit two years later than his predecessor George Osborne forecast) and eliminated the deficit on day-to-day spending. But Johnson is ready with his bucket of cold water. “Chancellors always talk up the positive numbers,” he says, “but we’re not out of austerity; we’re nowhere near out of austerity. There are still big spending cuts and big social security cuts to come.”
He says the government has done well to get the deficit under control, but thinks the pips are now starting to squeak. “If you look at the period up to 2013/14, spending came down without big political consequences or things falling apart. But, in a whole range of areas, that is no longer true. If you look at what’s happening in prisons it’s just disastrous. Local government until 2014 was coping fine. It really isn’t any more. Clearly, the health service is struggling in a way that, three or four years ago, it wasn’t. So it feels as if we’ve got to the crunch point. We’re really beginning to feel the cost.”
Government borrowing is now back to pre-financial crash levels. “It is quite an achievement to have got borrowing down from the highest level since the war to pretty much normal kinds of levels,” he says. “It’s come down from about 10% of national income to 2%, so from well over £150bn to a number somewhere in the low 40s.” That’s annual. It’s an achievement that we are only running up extra debt of £40bn a year. My head is starting to spin.
It spins further when he tells me what the national debt is – approaching £2tn, which equates to around 90% of GDP. When, I ask, do you hit the panic button about the size of the debt? “Who knows?” he says. “We are not close to that at the moment. Interest rates are still incredibly low, and despite the fact that the debt is twice as big as it was in 2008, we are not paying any more interest because rates are so low. The risk that the Treasury is balancing all the time is that at some point we’ll have another recession and if the debt then goes up by another 40% of national income, can we manage 130% of national income debt? Maybe. Probably. But at the point at which you can’t and people stop lending to you, then you lose control in quite a big way. You’re managing a very small risk of a very bad outcome.”
Johnson reckons it is time for politicians to level with the public about the financial challenges facing the UK. Brexit, plus our ageing population and the resultant pressure on health, pensions and social care, means something has to give. “It’s very hard to see what’s left to squeeze,” he says. “There is no defence budget to squeeze. There is no industry budget to squeeze, no housing budget to squeeze. Where do you go next? Unless you say, ‘Well, we are going to have to increase spending as a fraction of national income and increase taxes over the next 10 or 20 years’, which at least until the last Labour manifesto was a conversation that no politician was terribly keen to have.”
He says both of the main political parties are living in a fantasy world. “On the one side you have a party saying you can have all the welfare state we’ve ever had and pay no more tax, which isn’t true. And on the other side, you’ve got them saying we can levy more tax and it’ll be somebody else who pays because it’ll come off companies and the rich, which also isn’t true. Labour’s election manifesto had an awful lot of overestimates about what you can get from companies and the very rich, and didn’t fully balance out. You can’t have European standards of welfare with American-style tax levels. You have to make a choice.”
Making choices and being honest with the public is not, as Brexit shows, something politicians are good at. Analysing the shibboleths surrounding the NHS and the lack of progress on developing a system of social care, Johnson has written about the “infantilisation of public debate”, which he says emerged starkly in both the recent referendums. “In the Brexit referendum there were strong arguments on both sides, but you didn’t have any sense of the trade-offs. Referendums are a one-shot game and a pure yes/no, so everyone has to make out that everything is good about what they’re suggesting – the economy is better and immigration is better and sovereignty is better and and, and … It was exactly the same in the Scottish referendum. There were some entirely sensible and plausible arguments for Scottish independence, but it was absurd to pretend it wouldn’t involve spending cuts or tax rises in Scotland.”
I ask him if he ever considered a political career himself – many of the young alumni of the IFS, which he once was, go into politics. He pauses before giving the definitive reason why he could never have done it: “If you are working in the party political system, you have to subjugate yourself to such an extent to the party line. Some politicians manage to be independent, but not many successful ones.”
That is not, however, to say that he despises politicians for the compromises they have to make and the false claims that are part and parcel of political life. He recognises the nightmarish task they have. “Making policy is hard. You’re trading off these huge political and ethical issues. You’ve got your own ideology; you’ve got lots of conflicting evidence; whatever you do is going to make some people better off, some people worse off, and you don’t quite know who they’re going to be.”
Does he ever doubt the merits of democracy, with its requirement to make a “retail offer” to the public that is inevitably overblown, perhaps even mendacious, to win votes? Might China be on to something with its authoritarian centralism that at least ensures stability and long-term planning? “I don’t doubt that democracy is the right way to do things,” he says, “but I do doubt some of our institutions. We are in an unusual position at the moment where you’ve got politics pulling to the left and to the right, and you’ve got nothing really filling the middle. That’s partly happening across the world, but it is a reflection of the way first-past-the-post works here.”
So does he speak for the technocratic middle? “I don’t know about the middle,” he says. “I’m always aware that there is a technocratic bit, which is what I and my colleagues do, but there is also an ideological bit and a democratic bit, and that’s really important. The best we can do – and the best that civil servants can do – is to put the evidence before the people who have been elected and then it’s their choice. That creates desirable constraints. It would be a disaster if the country was run by pure technocrats.” But why? That sounds ideal. “They wouldn’t be listening to the people,” he counters. “Arguably, that’s the lesson of Brussels.”
Johnson loves the IFS, and under him it has a pleasing energy and informality – a 50-strong group of mainly young researchers and economic and social policy experts who can run a slide rule over the more outlandish claims of politicians and point out the pitfalls of their policies. He spent his 20s there after getting a first in philosophy, politics and economics at Oxford, then worked at the Cabinet Office, the Financial Services Authority and the Treasury before returning to the IFS as a research fellow in 2007, just in time for the nation-redefining financial crash. He became its director in 2011.
His two immediate predecessors, Andrew Dilnot and Robert Chote, did 11 and eight years respectively before going on to grand posts elsewhere (and in Dilnot’s case bagging a knighthood), but Johnson looks nonplussed when I ask him if 10 years will be enough for him. He clearly hasn’t thought about stepping down, or started eyeing up other plum jobs. “I love the IFS,” he once declared. “I love what it does and I love the way it does it.” That love affair shows no sign of abating.
One economist told me that if you read Johnson’s weekly articles in the Times carefully, you are filled with despair, because as a nation we refuse to confront the hard questions he is raising. Politicians like to gambol in the long grass. I ask Johnson, who in person is anything but downbeat, whether despair is a legitimate response to his truth-telling. “I’m not filled with despair about what’s possible because we are a relatively low-taxed country by European standards,” he says. “You could perfectly easily, in an economic sense, raise more tax and still have an equitable, well-functioning economy. The thing that worries me is the difficulty of having a sensible conversation about it and the belief that, if you are going to raise more money from tax, there’s some free money floating around.”
There is no free money. If we want better health care, social care, education, transport, we are all going to have to stump up. He estimates that in the next 20 years, we will have to pay an extra 3% of national income in tax – equivalent to about £60bn a year – just to meet the rising pension and social care bill. He floats some bracing ideas: VAT on food; paying social insurance to help fund the NHS; road pricing to replace the £30bn a year in fuel duty that will be lost as cars move away from petrol and diesel; wealth taxes levied on expensive properties, second homes (which he sees as a key factor in the housing crisis) and even personal pensions, which have been sacred until now. These are the sorts of big ideas he wants Philip Hammond to start to embrace next week. Whether the chancellor will rise to the challenge is another matter. That long grass looks very inviting.
Even without Brexit, the challenges facing the UK would be formidable. With Brexit, they look cataclysmic. “The economics are obvious,” he says. “If you make trade with your biggest, nearest and richest trading partner more expensive, you will make yourself worse off. The truth is there is no dispute about that. Of course there is a case for Brexit. It’s just not an economic case. It’s a controlling-immigration case. With everything – and this is what’s frustrating about a lot of political debate – there are trade-offs. Do you want control of your borders or do you want to avoid taking a hit of a couple of per cent of GDP? You can’t have both.
Politicians tell you that you can have your cake and eat it, but you can’t. It’s true of pretty well all politicians about everything.”
The European Union has warned that it will regulate cryptocurrencies if the risks exposed by the meteoric rise of bitcoin and its ilk are not addressed.
The boom and bust of cryptocurrencies has seen some investors make millions where others have suffered heavy losses. Bitcoin, which now trades at about $9,000 (£8,000) a token but recently dropped to less than $6,000, leads the pack, rising nearly 2,000% to just under $20,000 in 2017, fuelling a global investment craze.
“This is a global phenomenon and it’s important there is an international follow-up at the global level,” Valdis Dombrovskis, the EU’s financial chief, said on Monday. “We do not exclude the possibility to move ahead (by regulating cryptocurrencies) at the EU level if we see, for example, risks emerging but no clear international response emerging.”
Dombrovskis was speaking after hosting a roundtable meeting attended by the European Central Bank, industry bodies and the Financial Stability Board, which writes and coordinates regulation for the Group of 20 Economies.
G20 finance ministers and central bankers meet in Buenos Aires in March, with cryptocurrencies set to be on the agenda. The EU would decide how to address the issue later this year or early in 2019, the financial services commissioner said.
Regulation of cryptocurrencies could seek to bring them in line with financial legislation designed to combat money laundering and counter-terrorism, forcing traders to disclose their identities and look to make it more difficult to use bitcoin, Ethereum or others for illegal activities.
Germany and France said this month that new opportunities arise from cryptocurrencies, but they could pose substantial risks for investors and be vulnerable to financial crime without safeguards. So far, however, there appears to be no strong consensus among G20 countries to regulate them closely.
Policymakers worry about losing jobs and growth to other regions if they crack down hard on innovation in the sector, especially stemming from the blockchain technology that underpins cryptocurrencies, which Dombrovskis said held strong promise.
Markus Ferber, a centre-right member of the European parliament, said a quick EU regulatory response was needed, rather than waiting years for international rules to trickle through.
“In order to make sure that retail investors do not fall prey to market manipulation and fraud, virtual currencies should be regulated as other financial instruments,” Ferber said in a statement.
In the wake of the resolution to the US government shutdown, the Dow Jones Industrial Average was initially expected to open higher.
But when trading began the Dow dipped 27 points or 0.1%, with investors moving on to worry about the impact of Donald Trump’s move to impose steep import tariffs, including possible retaliation. South Korea and China both protested at the duties on washing machines and solar panels.
The S&P 500 however edged up 0.03% and the Nasdaq composite climbed 0.23%.
David Autor, Ford Professor of Economics at MIT, has predicted that today’s giant tech companies – such as Facebook – will suffer the face of previous dominant companies.
He’s on a panel asking ‘can we live with monopolies’.
Autor explains that we currently live in an environment of ‘winner takes most’ markets, where having a small edge over your competitor gives you a massive advantage.
So firms like Amazon and Facebook are growing organically (people are on Facebook because their friends are on Facebook), but that doesn’t mean that this growth is healthy. Or sustainable, in the long run.
We did have these monopolies in the past, Autor points out, citing the US railroads
My guess is that Facebook will be pretty much non-existent in 20 years time, Autor declares.
Autor is also critical of the US model where employees are not treated as stakeholders (unlike shareholders).
This situation has created a level of inequality that has led to political upheaval, he says.
Elsewhere in Davos, the head of the Red Cross has warned that fresh humanitarian crises could break out this year.
Peter Maurer, president of the International Committee of the Red Cross, says there are a lot of fragile situations that could develop into “full-fledged” conflicts (as we saw with the Rohingya crisis in 2017).
Maurer says there are plenty of places on the brink of war, violence and disruption.
He cites Southern Philippines (which is under martial law), Myanmar, Afghanistan, the Middle East, and large parts of Africa as places where the Red Cross sees fragility – but “we don’t know which one will blow up in our face”.
So what can Davos do about it?
Top business leaders have the skills and resources to help businesses in those fragile areas, and help them tipping into conflict.
Maurer also warns that humanitarian organisations need more money:
In 2018 we face a big gap between the needs of people and the capacity of the international system as a whole to respond.
The gap can only be bridged by more and better finance.
Ultimately, Blanchett says, we must remember we are all citizens, and stand up for what we believe in.
Cate Blanchett is close to tears, as she talks about one refugee family she met in Jordan. They had fled conflict with five of their children, being shot at by all sides.
Eventually, the father had to choose between carrying his suitcases and carrying his children (he chose the children). No-one should be put in that position, she says.
Q: Aren’t politicians taking a hard line on refugees because they are reacting to the concerns of their populations?
Cate Blanchett argues that they’re actually reacting to populist media and the news cycle.
We are at a fork in the road, she says.
We try to teach our children to be compassionate, to be tolerant, to accept diversity, to share. But all the structures that are around them are not doing the same, so it’s quite a schizophrenic world they’re living in.
And taking a swing at populist politicians, she says she don’t understand how turning people in a boat back became an election winner.
Australian actor Cate Blanchett is talking about the refugee crisis now (yesterday she was handed a WEF award for her work on this issue).
She explains how she went backpacking through Europe in her youth, which opened her eyes to economic inequality.
I was staying in youth hostels that were more like Turkish prisons, She explains, seeing people who didn’t have anywhere else to go
Q: There’s been a lot of criticism of Australia’s policy to refugees….
Blanchett says she was ‘bewildered’ to see the generous, openhearted, multi-cultural Australia she grew up in “flouting the UN humans rights convention”
I was very distressed that Australia was reverting back to practices that made us a fortress again.
This drove Blanchett to become a goodwill ambassador to UNHCR
I think it’s shameful. There’s so much misinformation about refugees.
They are forced to flee, and then they are vilified in the media.
Blanchett says the misinformation about refugees is “very distressing”, and doesn’t connect with the actual people she has met.
There are 65 million displaced people in the world, 22 million are refugees, half are women and children. But just 1% have been resettled in advanced developed economies.
It’s the developing world that is shouldering the deep burden of refugees.
She cites the Lebanon, where a quarter of the population are now refugees.
Blanchett also criticises the way refugees are reported in the media:
People are told this narrative that these people, who have so much to offer, are going to be a burden on us or become a terrorist threat.
Q: But have some people in developing economies been encouraged to travel to countries such as Germany, because they hoped to be given asylum?
Should we not talk about it, Blanchett replies rhetorically. The problem is not going to go away.
These are not terrorists. These are innocent people, who want to return home.
She’s also calling for more burden-sharing between countries, to help address the refugee crisis.
The problem with all this optimism at Davos is that business leaders, economists and politicians have a nasty habit of missing impending disaster.
WEF veterans point out that the mood is often particularly upbeat shortly before a crisis.
Barclays CEO Jes Staley summed it up this morning, on the financial crisis session when he said Davos feels “a little bit like 2006 when we were all talking whether we’ve solved the riddle of economic crises.”
The Carlyle Group David Rubenstein agreed, saying:
Generally, when people are happy and confident, something wrong happens.
We have made great progress in reducing the deficit by three quarters since 2010, but government debt is still far too high. Our balanced approach to government spending is getting debt falling, while investing in key public services and keeping taxes low.
And the Office for Budget Responsibility said:
It appears that the underlying improvement in borrowing so far this year is a little faster than would be consistent with our November forecast.
Christoph Franz, the chairman of Roche, agrees that spirits are high at Davos this year – and with good reason.
Speaking to CNBC, Frans argues that ‘healthy’ economic growth is boosting optimism among top execs.
Basically, I have been here for more than ten years, I share your perspective, there’s a very positive mood right now among business leaders here in Davos, and I think the reason is, we see a growth perspective in, not only some specific countries, but on a global scale, and the growth is achieving numbers which we have seen only before 2007.
So, the economy is taking up, and for the time being, it is growth which has been created by a lot of investment.
Britain’s manufacturers continue to be optimistic about business prospects and exports, but are increasingly worried about skills shortages.
The CBI’s latest industrial trends survey for the three months to January showed 27% of firms were more optimistic about the general business situation that three months ago, while 14% were less optimistic. The balance of +13% is up from -11% in the previous quarter.
Growth in manufacturing output and domestic and export orders all picked up, compared with the previous three-month period, although the monthly order book figure showed a fall from +17 in December to +14 in January.
And the number of firms saying a lack of skilled labour was likely to limit output over the next three months was the highest for more than four decades. Rain Newton-Smith, CBI chief economist, said:
It’s good to see manufacturing going from strength-to-strength with growth up and the buoyant global economy boosting export orders. But the past depreciation in Sterling continues to leave its mark on firms’ costs and margins. With expectations for factory gate price inflation at their highest in 30 years, the pressure on consumer prices looks set to persist.
Capacity pressures are ramping up and skill shortages are a big concern, underlining the importance of establishing a future immigration system that provides companies with access to talent and labour. The building blocks of a new system that meets economic needs and public concerns must start with scrapping the net migration target, which has never been fit-for-purpose.
Modi wraps up his speech by identifying three priorities:
The world economy must be more inclusive
Policymakers must remain committed to a rules-based world order
Reforming the major institutions of the world, connected to politics, the economy and securtry
He talks about the Indian soldiers who died in world wars in the 20th century, to help create “peace and humanity”.
India can be a humanising and harmonising force in an uncertain world, Modi promises, citing Indian prayers and poetry which advocates a free and peaceful world.
Together we can create a ‘heaven of future’, he promises, in a somewhat gushing conclusion.
Alas, he’s not taking any questions.
On climate change, Modi says India is making big progress towards hitting its goals for renewable energy.
Modi says India will achieve strong growth over the next few years.
Kenneth Roth of Human Rights Watch suggests Modi isn’t living up to the glowing ideals he’s preaching today:
(remember, Modi was once banned from visiting the US following claims he had supported Hindu extremists during Hindu-Muslim riots. He was later cleared by the Indian Supreme Court).
Modi is now encouraging businesses to invest in India, citing the hundreds of laws and regulations which have been stripped out to make te economy more competitive.
Instead of red tape, we offer you a red carpet, he jokes.
Global stock markets have roared ahead in 2017, with the MSCI index of bourses in 47 countries up by 22% and almost $9tn (£6.6tn) according to Reuters. This has been fuelled by a boom in growth among developed nations and Donald Trump’s plan to cut US corporate tax rates – which is expected to boost company profits in the world’s largest economy and returns to shareholders. China managed to maintain its rate of expansion, dispelling fears over a potential sharp slowdown as it matures after decades of rapid growth, while the eurozone also staged a recovery after years of uncertainty. In Britain, the FTSE 100, packed with companies that earn much of their profit in foreign currencies, has surged as a result of stronger global growth and the weak pound since the Brexit vote.
Buoyant global trade
The Baltic Dry index is used as a proxy for global growth because it measures dry freight costs for commodities such as coal, rice and wheat. When there is a jump in demand for shipping these products, it signals expansion for the world economy. This year it has risen to its highest levels in four years amid a recovery in global trade. Other barometers for growth, such as surveys of business activity from firms’ purchasing managers, have shown appetite for goods and services in rude health across developed economies in recent months. Still, fears linger over a breakdown in trade from rising protectionism in the US and Europe.
Investors stay relaxed
Known as Wall Street’s fear gauge, the Chicago Board Options Exchange Volatility Index is a measure of the stock market’s expectations for how much prices might swing by, up or down, over a 30-day period. The higher the index, the more likely it is investors will be in for a wild ride. This year, the barometer fell to its record low of below 9 points. Anything above 20 indicates that things are going awry, and is a common feature of falling markets.
Pound stages Brexit comeback
The pound has staged a recovery on global exchanges since the start of the year amid gradual progress in the Brexit negotiations. Although sterling is still about 10% below its level before the EU referendum, the currency has risen by almost 10% this year to stand at about $1.3505. Meanwhile, the dollar has struggled to benefit in 2017 from the Federal Reserve’s interest rate hikes in March, June and December, while the euro has gained ground amid a strengthening eurozone economy and as expectations grow for the European Central Bank to finally start tightening monetary policy by curbing its quantitative easing programme.
Eurozone on the mend
One of the biggest surprises this year was stability in the eurozone after years of tumult. After the election of Donald Trump, many market watchers expected the next countries to succumb to populist politics would be in the EU – which could have spelled doom for the single currency. Marine Le Pen failed to take power in France, as did anti-Islam, anti-EU populist Geert Wilders in the Netherlands and Alternative für Deutschland in Germany. Meanwhile, amid a more stable political backdrop, growth has roared ahead. Still, accommodative monetary policy that is expected to be gradually withdrawn has helped, with ECB governor Mario Draghi saying the recovery will still heavily rely on stimulus from the central bank for now.
Wage growth remains subdued
There has been tepid growth in the price of goods around the world, barring the UK, where the pound’s sudden devaluation following the Brexit vote led to surge in imported food and fuel costs. Wage growth in particular was missing in action in 2017, despite low rates of unemployment across most major developed economies. This has left many in the economics profession puzzled, because tight labour markets typically lead to greater levels of bargaining power among workers to demand higher wages. It also poses an additional challenge to central bankers – who would like to see stronger wage inflation before they raise interest rates, normalising the world economy after years of stimulus in the wake of the global financial crisis that started 10 years ago.
Productivity puzzle persists
The failure to drive up the productivity of workers has puzzled economists the world over this year, not least in the UK. Although the problem is particularly sharp in Britain, each of the G7 nations has experienced sluggish growth since the crash a decade ago. That’s a worrying sign for wage growth, because greater output per hour worked, or per worker, can help to support higher pay for that output. The culprit could be higher levels of employment, low interest rates, or low levels of investment in productivity boosting projects by governments and businesses. In the UK, weak productivity growth was behind a sharp downgrade to GDP growth alongside Philip Hammond’s budget in November. It’s also one of the key reasons why UK workers aren’t expected to see their wages after inflation go back above pre-crisis levels until the mid 2020s.
Oil bubbles up
The global oil price has recovered sharply in 2017, benefiting from increasing demand from factories around the world, particularly in China, amid a boom in economic activity. After crashing in late 2015 to spook global markets, this year has been one of calm and steady gains. Opec has reined in production to keep a lid on supply, while there have been no major escalations in tensions to drive up the price to unsustainable levels. One warning: US shale oil production may start to come back online at current prices, as the more expensive costs involved with extraction become economical once more. This could boost supply, leading prices to fall.
Bitcoin mania takes hold
Probably the financial story of the year. Even though there are fears of a coming crash, 2017 will go down as the year of the cryptocurrency. Bitcoin’s rise has been meteoric, beginning the year valued at about $1,000 and reaching almost $20,000 by the middle of December. There have been wild swings on the way, with the currency losing more than a quarter of its value in a single day this month, before staging a recovery. Economists think bitcoin has all the telltale signs of a bubble, with worrying parallels to the Tulip mania of the 17th century, when the price of bulbs crashed in spectacular fashion after a buying frenzy.
Chinese debt worries
China’s rapidly accumulating debt pile, having quadrupled since the financial crisis, became of increasing concern this year – although has not yet roiled the global markets. The International Monetary Fund warned that Chinese debt is now high versus international norms and that rapid growth may have led to an unwillingness among officials to let struggling firms fail. In September, Standard & Poor’s downgraded its credit rating citing the risks from total debts in, which have quadrupled since the financial crisis. While China has started taking steps to rein in debt without having affected growth so far, economists worry a wrong move by officials could upset the apple cart in the near future.
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