Daily Archives: December 20, 2015

Corporate Debt in China: Above Cruising Altitude

By far the most worrying debt in China is held by the corporate sector.  Total borrowing by the nonfinancial sector shows that the total debt-to-GDP ratio has reached 240 percent of GDP as of the first quarter of 2015.  The corporate debt-to-GDP ratio was 160 percent of GDP, or $16.7 trillion as of the first quarter of 2015, and total corporate liabilities up to 200 percent of GDP when including corporate debt securities (bonds).  For some perspective, the corporate debt-to-GDP ratio in the United States is 70 percent, less than half that of China’s. China’s economy has seen some cyclical scares this year (think stock market and currency), but high corporate debt is a structural issue, potentially leading to a period of slower expansion of credit in an effort to reduce the debt-to-GDP ratio weighing on rapid growth. Read more