China has embarked on an economic balancing act that is bound to appear counter-intuitive to many observers. Trying to trim the country’s ballooning debt burden without sacrificing rapid growth sounds akin to keeping a horse running fast while feeding it less hay. There is always a danger that the horse may stumble and fall, causing the earth to shake.

Any sign of flagging economic dynamism in China will therefore be met with concern. Every year, the Chinese economy adds more to global output than any other. As a result, a flurry of less than vibrant economic statistics raises an insistent question: is China’s credit squeeze finally morphing into a credit crunch?

Deflation, as measured by the producer price index (PPI), deepened to -4.6 per cent in April. Industrial profits fell 2.7 per cent in the first quarter and land sales, a key source of revenue for cash-strapped local governments, by almost a third year on year.