According to the latest data from the International Institute of Finance (IIF), China’s debt as a percentage of gross domestic product (GDP) reached 335% in the third quarter of this year, up from 302% at the end of 2019.
The Bank for International Settlements (BIS), commonly known as the “mother of central banks,” pointed out that China’s household debt surged by about $380 billion in the first half of this year, almost four times the increase of the second-ranked U.S. Total household debt to GDP increased by 3.9 percentage points to 59.1 percent, higher than some developed economies such as Germany and Japan. This exacerbated a major weakness in the Chinese economy.
The Chinese government’s expansion of infrastructure spending in response to the post-epidemic economic development has indirectly fuelled a real estate investment boom, with many households running up debt as a result of property purchases. In 16 of the last 17 years, China’s real estate investment growth has exceeded GDP growth and is likely to do so this year as well.
In addition, according to Xue Karn Qian, deputy director of the Government Debt Research and Evaluation Center of the Ministry of Finance, China, by the end of this year, China’s local government debt balance will reach 26 trillion yuan, the debt ratio is close to the lower limit of the warning range, if the pace of debt issuance remains unchanged, next year may have to enter the warning range.
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