A security guard walks on the bund in front of the financial district of Pudong in Shanghai. Photo: Reuters/Aly Song

If economists and investors predicting a crash landing for China’s economy were not already tired of being wrong, the first half of this year surely tested their spirit. Despite a persistent theme of impending doom running through foreign media coverage of China’s economy, it has outperformed strikingly, even as credit growth slows amid a crackdown on excessive borrowing.

Some, such as Kyle Bass, who famously shorted the US housing market during the financial crisis, are nonetheless sticking to their guns. Bass still insists that China’s success is all smoke and mirrors.

“What the public narrative is and what they have been doing behind the scenes are two completely different stories,” Bass told Reuters in June. “China has been masterful controlling the public narrative. As a fiduciary, I have no idea how anyone can invest in China.”

Upon closer inspection, however, it looks like China’s efforts to reign in risks are real and are working.

Andrew Polk writes for Bloomberg that creditor committees are already putting a dent in China’s mountain of corporate debt, and China may be turning an important corner:

Most importantly, China finally seems to be grappling with its debt problems in ways that don’t always make the headlines. Since the middle of 2016, China’s banking regulator has been pushing financial institutions to establish creditor committees to renegotiate their claims on companies. These committees are comprised of three or more lenders, so banks can’t negotiate against each other’s interests, and they address a fundamental problem: the frayed relationship that occurs between lenders and debtors in challenging economic times.

In practice, the negotiation process — which generally takes place outside of and as a precaution against legal bankruptcy proceedings — sees banks give borrowers a break in return for a clean and clear accounting of a company’s financial position. Generally, banks take some write-offs and extend loan maturities while lowering interest rates on some debt. Other liabilities can be transferred to a parent company, and sometimes a full-scale asset restructuring is initiated.

Because these committees are ad hoc institutions, there’s no overarching data tracking their proliferation. But, at the banking regulator’s March press conference, an official stated that 14.85 trillion renminbi in loans have been “dealt with” through 12,836 creditor committees nationwide over the past year. That covers 12 percent of corporate debt in China.