Beijing's clampdown on leverage costing China markets billions

Hong Kong

HOW much pain can Chinese leaders stomach? It's becoming a key question for investors as the government's stepped-up campaign to rein in financial leverage ripples through markets.

The clampdown has erased at least US$453 billion from the value of Chinese stocks and bonds since mid-April, spurred US$21 billion of cancelled debt sales and compelled the People's Bank of China (PBOC) to inject US$48 billion into jittery money markets.

Sales of asset-management products by lenders and trust companies have plunged by more than 30 per cent, while domestic real estate transactions have slowed and metals prices have buckled.

The upheaval hasn't reached crisis levels yet. But as the nation's equity crash in 2015 showed, market declines in China have a habit of snowballing. As authorities juggle the conflicting goals of curbing leverage and maintaining economic growth before a Communist Party leadership reshuffle …