Data released by the Communist Party’s Bureau of Statistics on Sunday showed that China’s gross domestic product will exceed $100 trillion in 2020, up 2.3% year-on-year. In this regard, some economic analysts pointed out that China’s economic growth relies on debt support, and from the incremental debt to incremental GDP ratio observed, 13 units of additional debt input in 2020 to produce 1 unit of GDP, the economic growth can not catch up with the speed of debt snowball growth.
Official data: China’s GDP exceeds $100 trillion in 2020
On Sunday (Jan. 17), data released by the Communist Party’s Bureau of Statistics showed that preliminary estimates show that China’s GDP for the full year 2020 will be 1,015,986 billion yuan, an increase of 2.3% over the previous year at comparable prices. By quarter, it grew 6.5% in the fourth quarter, on top of a 6.8% year-over-year decline in the first quarter, 3.2% growth in the second quarter and 4.9% growth in the third quarter.
U.S. financial media CNBC reported that China’s economy grew by 2.3% in 2020, but consumer spending fell and Chinese consumers remained reluctant to spend money, with retail sales shrinking by 3.9% for the year.
Analysis: $13 Debt Output $1 GDP Economic Growth Can’t Keep Up With Debt Snowball Growth
The official data that China’s GDP will exceed 100 trillion yuan in 2020, Chinese financial analysts “By the Bar” wrote on Jan. 18, said that China’s GDP has broken the 10 billion yuan mark for the first time under the influence of the epidemic, but another more remarkable data is that the ratio of incremental debt to incremental GDP has exceeded 13 for the first time.
The column writes that China’s incremental social finance/incremental GDP has climbed at a mind-boggling rate in recent years. Even in 2019, which was not affected by the epidemic, the ratio of incremental debt to incremental GDP climbed at an extremely alarming rate, from 2 in 2018 to 7 in 2019.
This means that 2 units of additional debt input to produce 1 additional unit of GDP in 2018 will already require 7 units of additional debt input to produce 1 additional unit of GDP by 2019.
Due to the impact of the epidemic, this figure becomes 13 units of additional debt input to produce 1 unit of GDP in 2020, 6 times more than in 2018.
As can be seen in the chart below, incremental broad money versus incremental GDP has set a new record since 1992.
Ratio of incremental debt to incremental GDP in China
By the analysis of the column, 1999-2007 is China’s incremental money to incremental GDP ratio continued downward, showing that the economic growth rate to exceed the monetary growth; 2008-2009, in response to the subprime mortgage crisis, the value of the ratio of incremental M2 to incremental GDP once reached 4.6, that is, 4.6 yuan of incremental money to create 1 dollar of incremental GDP, the monetary increment clearly exceeded the economic growth, which is to printing money to stimulate the economy; 2010-2011, as can be seen from the above graph, strong stimulus attempted to exit, the ratio of incremental money to incremental GDP rapidly went down, showing monetary tightening, while debt was also taut, and the interbank crisis eventually led to the transfer of monetary policy to easing, and the first attempt of the CCP to exit stimulus was not successful; 2011-2015, monetary policy was transferred to leveraging; 2015-2018 , the CCP again tried to exit the stimulus, and then the debt was taut, leading to a debt crash in late 2018, the CCP’s monetary policy was again adjusted to easing, and the CCP’s attempt to exit the emergency stimulus again was also unsuccessful; in 2019, re-leveraging; in 2020, the leverage skyrocketed due to the impact of the epidemic.
In 2020, it will take 13 yuan of incremental debt (incremental social finance) to create 1 yuan of GDP, more than 6 times that of 2018, and this economic growth will not be able to catch up with the debt snowball. cannot keep up with the snowballing growth of debt.
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