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China debt load reaches record high as risk to economy mounts 

April 25, 2016

Gabriel Wildau and Don Weinland, The Financial Times

China’s total debt rose to a record 237 per cent of gross domestic product in the first quarter, far above emerging-market counterparts, raising the risk of a financial crisis or a prolonged slowdown in growth, economists warn.

Beijing has turned to massive lending to boost economic growth, bringing total net debt to Rmb163tn ($25tn) at the end of March, including both domestic and foreign borrowing, according to Financial Times calculations.

Such levels of debt are much higher as a proportion of national income than in other developing economies, although they are comparable to levels in the US and the eurozone.

While the absolute size of China’s debt load is a concern, more worrying is the speed at which it has accumulated — Chinese debt was only 148 per cent of GDP at the end of 2007.

“Every major country with a rapid increase in debt has experienced either a financial crisis or a prolonged slowdown in GDP growth,” Ha Jiming, Goldman Sachs chief investment strategist, wrote in a report this year. Read more

 
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