Wednesday, April 29, 2015

29/4/15: China's Debt Pile is Frightening & Getting Worse

Just catching up on some interesting data on China, courtesy of @AmbroseEP, showing debt to GDP ratios for China's real economy:

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) 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.

Meanwhile number of stock market accounts has gone exponential in recent days - using borrowed money (Chinese residents borrowed over Yuan 1 trillion or Euro150 billion worth of cash to pump into stock markets):

Economy is clearly slowing down in China, with conflicting reports and estimates of 1Q 2015 growth suggesting possible contraction in the real economy and domestic demand. (See

At the top of debt chain are local authorities: latest official data shows borrowings by the local authorities were up by almost 50% since the start of H2 2013 to c. 16 trillion yuan. Local authorities debt growth accounts for a quarter of changes in overall domestic debt since 2008. Recently, the IMF warned China that the country overall economic debt is expanding at a faster pace than debt in Japan, South Korea and the U.S. grew before the onset of the Global Financial Crisis.

My view: when this pile of Chinese debt blows, things will get spectacularly ugly, globally.

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