china household debt to gdp

Before it's here, it's on the Bloomberg Terminal.

Over the past 18 months, there has been a material acceleration in the formation of nonperforming loans (NPLs) at China's banks, as well as a comparable acceleration in write-offs of bad loans. The real growth of the world’s second-largest economy slowed to a record-low pace in the second quarter amid the negative effects of the trade war with the U.S. as well as longer-term factors such as its aging society. Where are the links??!! Part II will discuss the risk of a property bubble, and Part III will explain why the absence of the rule of law is a serious long-term risk. Consumer Bank Lending Rate Consumer Confidence Consumer Credit Consumer Spending Disposable Personal Income Gasoline Prices Households Debt to GDP Households Debt …

This is an important distinction from the pre-GFC period in the US, when there was a steep increase in consumer debt, especially in subprime mortgages, and the "enormous rise in residential mortgage foreclosures soon developed into a full-blown financial crisis and led to one of the sharpest market contractions in US history. This reflects that private firms had a couple of difficult years, and it resulted in a higher liabilities-to-assets ratio. IFF data indicates that China’s outstanding debt claims on the rest of the world breached $5.5 trillion in 2019 – or over 6% of global GDP, as compared to $875 billion in 2004. But the steep jump in lending to finance the GFC stimulus was also the root cause of China's current debt problem. From an international perspective, the stimulus was also successful in that it put a floor under global economic growth: in 2009, China offset most of the sharp decline in global growth from the US, EU and Japan. And there has been some progress in dealing with bad loans. Figures from Chinese think tank the National Institution for Finance and Development (NIFD) point to total debt of 245.4% of GDP as of the end of 2019, for a rise of 6.1 percentage points compared to the preceding year.

Officials said they hoped a network of bank branch managers could be held responsible for ensuring that construction proceeded rapidly with a minimal level of waste, fraud and mismanagement.

According to China’s National Institution for Finance and Development, China’s debt-to-GDP ratio rose 6 percentage points.over 2019 to 245% by the end of the year. Additional positive factors are that China's banking system is very liquid, and that the process of dealing with bad debts has begun.

This is the first of a three-part Sinology looking at what could go wrong in China. The NIFD also is partly financed hy foreign “donors”. IMF economists found that among SOEs, "leverage has increased significantly at the tail end of the distribution at the 75th and 90th percentiles.". Dealing with this will be a serious challenge. China's real problem is corporate debt. Really, how reliable they really are ??!! The State Council, China’s cabinet, said last month that banks should try to sell more than 180 billion yuan ($26.2 billion) of bonds to fund small firms in 2019 as well as lend more to the manufacturing and services sector. China’s government debt also grew at its fastest annual pace last year since 2009, the IIF said, and household debt and general government debt are now at all-time highs of 55% of GDP. The problem for private firms was not a sharp rise in leverage. Over an extended period of time, if the government were to fail to reduce the growth rate of new credit to SOEs in overcapacity sectors, the scope of the debt problem would expand and the cost of cleaning it up would jump. Moreover, the largest share of Chinese household debt is home mortgages, and these are far safer than the mortgages that created significant problems in the past decade for households in the US and UK For example, about 90% of new homes in China are bought by owner-occupiers (not speculators) who are required to pay a minimum of 20% cash to receive a mortgage, and most put down 30% cash or more—far above the US median cash down payment of 2% of the purchase price in 2006. There are no privately owned banks involved, so there is no mark-to-market pressure. China’s domestic debt has been rising at rate of around 20% per year on average since the Great Financial Crisis of 2008, significantly outpacing GDP growth. Cleaning up China's debt problem will be expensive, but will not likely lead to the dramatic hard landing or banking crisis scenarios that make for a sexier media story. Back then, officials told me they preferred to use bank loans because every bank in China was (and still is) controlled by the government, and most of the loans went to state-owned enterprises (SOEs), which were responsible for managing the construction projects (although much of the work was carried out by privately owned contractors).

The report pub­lished by the Wash­ing­ton-head­quar­tered IFF in May in­di­cates that Chi­na’s to­tal do­mes­tic debt reached 317% of GDP in the first quar­ter of 2020. The most important difference between China's debt problem and past debt problems in Western countries is that in China, there is little private-sector participation in debt creation.

The government rejected the idea of a large currency devaluation to boost exports because the problem was lack of demand in markets such as the U.S. and Europe, not weak competitiveness of Chinese goods. Using official data, China’s debt to GDP ratio is likely to rise between 16-22 per cent this year in contrast to a 6 per cent rise last year.

With nominal GDP growth now running at about 8%, far outpaced by the growth in aggregate financing at about 11%, means that the debt-to-GDP ratio is bound to increase, according to Raymond Yeung at Australia & New Zealand Banking Group Ltd. Sources: IIF, BIS, Haver, National Sources, Bloomberg.

A new report from the International Institute of Finance (IIF) sheds light on the current state of China’s overall debt levels. The 2nd International Investment Middle East Forum will look at where the industry is heading, the challenges and opportunities for the industry in the Gulf, and how IFAs are adapting to such reforms as BOD-49 and DIFC’s DEWS policy. Could an economic slowdown turn a debt problem into a banking crisis? Another factor contributing to the modest improvement in China's debt problem has been the slowdown in the growth rate of credit outstanding in the economy, a large share of which flows to SOEs. The reason is that the potential bad debts are corporate, not household, debts and were made at the direction of the state—by state controlled banks to state-owned enterprises. And in China, local governments are all effectively branch offices of the central government, in contrast to the US, where there is a clear separation between the financial obligations of local, state and national authorities.

The nation’s total stock of corporate, household and government debt now exceeds 303% of gross domestic product and makes up about 15% of all global debt, according to …

Corporate debt-to-GDP, which rose sharply from 93% in 2008 to 151% in 2015, was 153% at the end of 3Q18, according to data from the Bank for International Settlements (BIS). China’s efforts to shore up sagging economic growth are leading to a resurgence in indebtedness, underlining the challenge President Xi Jinping’s government faces in curbing financial risk. The IFF said that the surge in China’s lending abroad was driven by the Belt and Road initiative, which has channelled $730 billion in lending to more than 112 countries since 2013. And let’s not forget who is financing those institutions and thnk tanks and especially the IIF which got the American triggerd financial world crisis totally wrong . This provides the state with the ability to manage the timing and pace of recognition of nonperforming loans. Privately owned small- and medium-sized enterprises (SMEs) are the engine of China's economic growth, accounting for more than 85% of employment and almost all new job creation, as well as most investment. The report published by the Washington-headquartered IFF in May indicates that China’s total domestic debt reached 317% of GDP in the first quarter of 2020.

Also, China's debt was the result of spending on public infrastructure, which is a sound, long-term investment, helping reduce poverty and raise productivity.

It is also worth noting that in addition to a relatively low household debt-to-GDP ratio of 50%, Chinese families have a very high savings rate, with household bank deposits equal to about 80% of GDP. The state sector has also been reducing employment, which enables some SOEs to shut inefficient or unused capacity, some of which had been kept operating simply to protect jobs. There were significant job cuts in the industrial sectors with serious overcapacity problems, regardless of ownership, over the past four years. Similarly, overall debt-to-GDP, which rose from 138% in 2008 to 232% in 2015, rose less rapidly in recent years, from 243% at the end of 2017 to 253% at the end of 3Q18.

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