China’s
growing debt is affecting the country and the global economy,
according to Charlene Chu, an influential China analyst.
"Everyone
knows there’s a credit problem in China, but I find that people
often forget about the scale. It’s important in global terms,"
Chu said in an interview with the Financial Times. Chu, who made her
name warning of the risks from China’s credit binge, has predicted
that by the end of the year, the country will accumulate $7.6
trillion worth of the so-called "bad" debt.
The comment
came the day after the International Monetary Fund (IMF) warned that
Chinese debt could be the reason for the next financial crisis as
borrowing becomes unsustainable. "International experience
suggests that China’s credit growth is on a dangerous trajectory,
with increasing risks of a disruptive adjustment or a marked growth
slowdown," the IMF report said.
The IMF said
China needed three times as much credit last year to achieve the same
amount of growth as in 2008. A report in June by the Institute of
International Finance (IIF) said China's total debt was over 304
percent of GDP as of May this year.
Moreover,
“the household debt-to-GDP ratio hit an all-time high of over 45
percent in the first quarter of 2017 —well above the Emerging
Market average of around 35 percent,” the IIF said.
Since the
2008 financial crisis, China has become the growth engine of the
global economy. The country has contributed to more than half the
increase in world's GDP in recent years.
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