China’s Share of Global Debt Tripled Since 2009: Standard Chartered

(Bloomberg) -- By the end of last year China’s share of global debt had tripled since the 2009 global recession, a period in which the country unleashed a credit boom to sustain rapid growth, according to estimates by Standard Chartered Plc.

China remains one of three high-risk countries, along with Argentina and Turkey, Standard Chartered economists led by Singapore-based David Mann wrote in a 100-page report on leverage dated Friday. Steps to curb financial risks helped halt the rise of China’s total debt-to-GDP ratio -- corporate, financial, household and government -- early in 2018. The bank sees it climbing again to about 290 percent by the end of 2020, versus 270 percent as of March 31.

“China remains our biggest concern in terms of leverage,” Mann and his colleagues wrote. “The good news is that even in the low-probability scenario of a debt crisis in China, the knock-on impact on other markets would likely be limited to a decline in demand,” though increasing foreign ownership of Chinese securities could bump up risks, they wrote.

Among the metrics Standard Chartered published in its report:

  • China’s debt -- corporate, household and government -- made up 18 percent of the estimated global total in 2017, up from 6.1 percent in 2009.
  • China’s share of global debt is the third largest, behind the U.S. and euro area. The dollar amount of its outstanding debt is now almost on a par with the euro zone.
  • Household debt has been rising at a pace that’s “concerning,” though from very low levels. China’s household debt-to-income ratio is now higher than that in the U.S., at 104 percent, though below the American peak of 132 percent during the financial crisis.
China’s Share of Global Debt Tripled Since 2009: Standard Chartered

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