China’s share of global debt has grown three-fold since the country began a credit-driven growth campaign in the wake of the 2008/09 global financial crisis, according to the latest research by Standard Chartered.
The sum of China’s corporate, household and government-held debt made up 18% of the world’s total as of the end of 2017, the report wrote, growing from 6.1% in 2009. This puts China in third place in the world rankings of outstanding debt, behind the US and the EU bloc.
The report, authored by Standard Chartered economists led by David Mann, identified China, next to Argentina and Turkey, as a high-risk country due to the “concerning” rise in its total debt-to-GDP ratio.
The bank forecasts the metric to jump to 290% by the end of the decade, compared to around 270% at the end of March this year, despite some success from Beijing’s deleveraging campaign in slowing the rate of increase.
“China remains our biggest concern in terms of leverage,” wrote Mann. “The good news is that even in the low-probability scenario of a debt crisis in China, the knock-on impact on other markets would likely be limited to a decline in demand.”