China’s debt goes above 250% of GDP: Standard Chartered

BEIJING - China’s total debt went to more than 250% of GDP at the end of June, up from 147% at the end of 2008, according to a new estimate from Standard Chartered Bank. By comparison, the US had a ratio of about 260% by the end of last year, while the UK was at 277%. Japan topped the world with a ratio at 415%, according to Standard Chartered calculations.

According to the Financial Times, such a rapid build-up is of far more of a concern than absolute levels of debt, since increases of that magnitude in such a short period have almost always been followed by financial turmoil. The growing dependency shows no signs of being reversed, as the ratio increased by 17% in the last six months compared to an increase of about 20% for the whole of 2013.

Working in China’s favour is the fact that the economy is still mostly funded domestically and foreign borrowing still remains at less than 10% of GDP. State ownership of the vast majority of the formal financial system, as well as most of the biggest corporate borrowers can limit the effect of a financial crisis, since loans can be ordered to be rolled over.

According to the report, the key question will not simply be how to deleverage, but how to “deleverage beautifully” so as to reduce the debt burden, prevent collapse in investment, and reduce job losses. www.webershandwick.cn (ATI).