Will China Trigger the Next Global Recession?

by Jing Jin

China’s debt growth rate has become the focus of some discussions and, fair enough, from comparing the outright levels, it may seem that China can collapse at any moment. Daniel Fernandez suggested this in his article “Has China Reached Its Debt Limit?” in Mises Wire. In response to the government’s monetary expansion stimulus plan after the 2008 financial crisis, China’s corporate sector did indeed leverage up quickly, followed by an equally fast pace of leveraging in the household sector. However, in order to avoid comparing apples with oranges, we need to take a closer look by putting these numbers into perspective. Using the same data source as used by Fernandez, we find that China’s total debt as a percentage of GDP was 254 percent by the end of 2015. Debt-to-GDP ratio of corporate, government, and household sectors stood at 170 percent, 44 percent, and 40 percent respectively.

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