China’s debt ratio hits record high as efforts to offset US trade war mean ‘there is no such thing as a free lunch’
- China achieved a growth rate of 6.4 per cent in the first quarter after Beijing scaled back its deleveraging campaign in a bid to help the world’s second largest economy
- But China’s debt ratio rose 5.1 percentage points to 248.83 per cent at the end of March, according to a new think tank report
China’s efforts to offset the affects of the trade war with the United States have resulted in its overall debt level reaching a record high in the first quarter of 2019, with authors of a new study remarking “there is no such thing as a free lunch”.
But the leverage ratio of China’s real economy, which measures outstanding debt of residents, non-financial enterprises and the government sector against the country’s nominal gross domestic product (GDP), rose 5.1 percentage points from the end of 2018 to 248.83 per cent at the end of March. This was the highest since the data series began in 1993, according to a joint report by the National Institution for Finance and Development and the Institute of Economics under the Chinese Academy of Social Sciences.
“There is no such thing as a free lunch,” the report from the two government-affiliated think tanks said. “The robust and better-than-expected economic growth in the first quarter was at the price of a sharp rise of the macro debt level.”
There is no such thing as a free lunch. The robust and better-than-expected economic growth in the first quarter was at the price of a sharp rise of the macro debt level.
Last year, China’s overall debt level dropped for the first time since records began as the government programme to rein in debt and risky lending began to have the intended effect.