Chinese households are holding more debt than ever before, according to the latest research by insurance group Allianz, fuelling fears that a key driver of China’s recent economic growth could begin to slow.
Household debt equated to 49.1% of GDP in 2017, the highest recorded ratio and an uptick of 20 percentage points from five years ago, the Allianz global wealth report read.
“No other country saw its private debt burden rising so fast,” the Financial Times quotes from the report.
While large, state-linked corporations are considered heavily responsible for much of the China’s accumulated debt since the global financial crisis, recent economic conditions, such as rising house prices and an explosion of accessible credit sources, have strongly encouraged households to take on more credit.
“China needed to catch up to some extent, as Chinese private households only obtained access to bank loans in 2003,” added Allianz.
If the higher-debt levels spark a tightening of consumer expenditure, this could remove considerable momentum from China’s economy which is already suffering from weaker domestic demand.