Could an economic slowdown turn a debt problem into a banking crisis? In most countries, a huge stimulus would have been funded directly by the government via fiscal spending. For example, due to supply-side reforms, we estimate that in 2017, fixed asset investment in the coal industry was 50% lower than in 2013, while investment in the steel industry was 25% below the 2013 level. 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 a report published by the Institute of International Finance. This is a sharp contrast to Thailand's 62% ratio in 1996, ahead of the Asian Financial Crisis. As a result of these changes, China's overall debt-to-GDP ratio stabilized during the first three quarters of 2018. Figures from China’s State Administration of Foreign Exchange (SAFE) put the China’s foreign debt at USD$2.05 trillion at the end of 2019, as compared to $2.03 trillion the preceding quarter. Another policy mistake that would lead me to reconsider my views on this issue would be if the central government were to fail to control the future growth of debt by local government finance vehicles (LGFVs). For now, accelerated debt growth appears to be a price policy makers are willing to pay in order to brake the slowdown. The absence of a large consumer debt burden should make China's overall debt problem much easier to manage and make the debt reduction process much less painful. Bad Debt of Chinese Banks Hit 2.41 Trillion Yuan at End of Q4 2019, Holds Steady with Q3, China’s Bad Debt Hit USD$1.5 Trillion in 2019: PwC Report, Fears over Chinese Debt Explosion Are Unfounded: BOC International Economist Xu Gao. And there has been some progress in dealing with bad loans. Now at about 153%, China's corporate debt-to-GDP ratio is one of the highest in the world. The GFC led to a collapse in global demand for goods, including exports from China. Rising debt levels at private industrial firms unlikely to be dangerous. 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. Policy makers have beefed up fiscal support, including easing the rules for using government debt in some infrastructure projects. That ratio jumped dramatically in 2009, as the stimulus was deployed, and continued to climb until it reached about 253% of GDP in September 2018. Where are the links??!! It is also important to note that the majority of potential bad debts are held by state-owned firms, while the leverage of the privately owned companies that employ the majority of the workforce and account for the majority of economic growth isn't high. 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. because some of your articles were false or wrong and often hard to verify. Instead, Beijing undertook the world's largest Keynesian stimulus: spending government money to accelerate the construction of public works projects— everything from bridges and roads to wastewater treatment plants—that had been scheduled for future development.
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