Liquidity evaporates in China as ‘fiscal cliff’ nears

Unless China changes course, it is set to tighten fiscal policy by 5.5pc of GDP this year, five times Britain’s austerity dose annually since the Lehman crisis

Nobody can fault China’s leaders for lack of bravery. The Politburo has kept its nerve as the world’s most giddy experiment in credit-driven growth faces assault on three major fronts at once.

Real interest rates have rocketed. The trade-weighted rise in the yuan over the past two years has been spectacular. Fiscal policy is about to tighten drastically as the authorities clamp down on big-spending local governments.