Now, note that the comparatives are all advanced economies that can carry, normally, higher debt levels. Which makes China's 282% estimated total debt pile rather large.
The chart references as a source data presented in this (see scone chart) http://trueeconomics.blogspot.ie/2015/03/5315-troika-tale-of-irish-debt.html but adjusted to reflect RBS estimates. which pushes McKinsey point for China horizontally to the levels close to Greece.
As someone else pointed out, nominal GDP growth in China is apparently now lower than interest on debt....True Economics
China's Debt Pile is Frightening & Getting Worse
Constantin Gurdgiev
Very misleading chart and title. Those bar graphs include government debt, so are not all private debt. Household debt in China is actually much lower than the rest. Corporate debt is much higher.
ReplyDeleteYeah, it's the corporate debt that is the problem.
ReplyDeleteBut some of the government debt is regional and local and that could be problematic in some cases, too, if there is a RE bust.
Difficult to know about Chinese data, but I would think that if anyone has a handle on it McKinsey does.
Wonder how much of the corporate debt is gov't debt in disguise ... state owned enterprises, or state directed lending with no particular expectation of payback.
ReplyDeleteThis is why it is difficult to get a handle on the Chinese economy from a Western perspective. It not a capitalistic system but rather market socialism "with Chinese characteristics."
ReplyDeleteBefore you can say private debt is problematic you have to understand what effect it has in the first place.
ReplyDeleteNot sure the effect in China is the same as here in the West.
Assumptions matter.
Not sure why anyone in the West is really concerned about Chinese debt to be honest. As I understand it (please correct me if Im wrong)they do not allow anyone outside China at present to hold Chinese debt. Its not like China owes any debt to Americans or Germans or Canadiens. Its all within China. No American investor should be concerned about a Chinese default since no promises have been made to any Americans. When China does business with Americans they do it in US$, which allows them to maintain their peg.
ReplyDeleteIn addition, as Dan pointed out, this is misleading graph since much of corporate debt is owed to households, much household debt is owed to financial companies, and govt debt is owed to everyone else in that graph
Chinese households have been net savings and corporations have been net investors. Now China is trying to rebalance away from its formerly export-centric growth model to a more balanced model by increasing the consumption investment ratio.
ReplyDeleteThe "ideal" ratio for a developed economy is ~80/20, consumption to investment. China's consumption has been about half of that.
See Lewis Turning Point.
The real issue is developmental rather than chiefly financial. Can China make this transition from a developed economy to a developed one.
This is what the Chinese leadership is focused on now and the private debt issue is subordinate to it.
They will do what it takes to iron out any debt issues, which are owed to themselves in yuan, which they issue.