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China’s Household Debt Approaching IMF ‘Red Line’ – Risk of Financial Crisis

China’s household debt burden continues to grow and is close to the International Monetary Fund’s (IMF) “red line” – an indicator of the risk of a financial crisis. This was reported by the Hong Kong newspaper South China Morning Post.

According to data from the National Institute of Finance and Development of China, for 2022 the total debt of Chinese households has reached a level of 61.9% of the national gross domestic product (GDP). However, by the end of the second quarter of 2023, the indicator had risen to 63.5%, closely approaching the IMF’s “red line” of 65%, indicating a (high) probability of financial risks.

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The bulk of China’s household debt is mortgage lending, the Hong Kong publication said, reaching 38.6 trillion yuan (about $5.38 trillion) at the end of June. In addition, Chinese liabilities also include consumer loans, credit card debts, and more.

The South China Morning Post highlights that total household debt in China has risen sharply since the global financial crisis, as it stood at just 17.9% of national GDP at the end of 2008.

And according to estimates by the Bank for International Settlements, China’s total household debt has reached $10.76 trillion by the end of 2022, which is about 61.3% of the country’s GDP.

The value of this important financial indicator in China is higher than that of Germany (where it is 55.2%) and India (where it is 36.4%), even more than the average value for developing countries – 47.7%.

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The publication notes that China is currently rapidly approaching the indebtedness of the population in the US (74.4%) and Japan (68.2%), which is, however, richer than the Chinese.

China’s high debt burden and slowing personal income growth are holding back consumption, the publication said. For 2022, the share of consumption in China’s GDP is almost 33%, although for the previous year 2021 it reached 58%. The main reasons for the sharp drop in consumption in the second largest economy in the world are the negative consequences of the pandemic and the severe anti-covid restrictions imposed for three years in many areas, according to experts.

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2023-08-04 13:00:00
#Chinas #population #overindebted #banks #surpassing #Germanys

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