China signals growth sacrifices to curb debt

China’s central government has ordered a small city in Inner Mongolia to halt construction of a Rmb30.5bn ($4.6bn) subway project, signaling Beijing’s willingness to sacrifice growth in order to rein in financial risks, the Financial Times reports. The city of Baotou had intended to fund 60% of the project’s cost from bank loans and held a groundbreaking ceremony in May, which was attended by Baotou’s top two officials. Over the past decade, local governments have relied on debt-funded investment projects to bolster their economies. In August the IMF warned that China’s non-financial sector debt would exceed 290% of gross domestic product by 2022, compared with 235% last year. But at a Chinese Communist party congress last month, President Xi Jinping departed from precedent by not mentioning the government’s official economic growth targets, signaling his administration’s higher tolerance for slower growth. The project would have increased Baotou’s existing Rmb90bn of debt by at least 20%.