MonitorAsia is steaming towards a debt crisis all of its own
With the level of private sector debt hitting new highs in China, South Korea and Thailand, there is no room for complacency
For the past five years Asia's leaders have congratulated themselves on their prudence and good judgment in avoiding the credit crisis which struck much of the developed world in 2008.
But while they have been busy patting themselves on the back, worrying signs have emerged that several of the region's main economies - together with a handful of major emerging markets elsewhere - are heading towards a nasty debt crisis all of their own.
In recent years the level of private sector debt has hit new highs in several East Asian countries. In China, South Korea and Thailand, for example, outstanding private sector debt came within a whisker of 150 per cent of gross domestic product last year. The average ratio for emerging markets was just 55 per cent.
But as Neil Shearing at Capital Economics points out in a research paper published this week, it is not the level of debt that should set alarm bells ringing, so much as the pace at which indebtedness is rising.
Default rates will begin to rise as loans made at the height of the lending booms begin to turn bad
Shearing examined 32 emerging market banking crises dating back to 1990. Of those, ten were caused by excessive public sector borrowing, and the remaining 22 by a rapid build-up of private sector debt.