L is for Level? China Predicts L-Shaped Recovery

L new

An Anonymous, “Authoritative Figure” reported that China will tend toward L-shaped growth (?).  The report went further to say that the build up in leverage was an original sin.  (A Communist mouthpiece using an original sin analogy?).

The report presented conflicting views of how to eliminate overcapacity.  First it states that zombie companies should be transformed through mergers and revamps rather than bankruptcy.  After that statement, however, it stated:

companies beyond salvage should be allowed to fail because debt-to-equity swaps would be costly and self-deceptive.

This last statement would appear to quash the recent rumors of banks exploring debt-equity-swaps for bad loan.  Curiouser and curiouser.

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