Ticking Debt Bomb of China
Chinese non-financial debt sector is extremely massive.
Key takeaways from new IIF #GlobalDebt Monitor:— IIF (@IIF) July 17, 2020
🔹 Debt-to-GDP now at record-high 331%, up from 320% in Q4 2019
🔹 #EmergingMarket debt now at 230% of GDP, a 10%pt increase since Q4 2019 driven mostly by Chinese non-financial corporate debt
Full report: https://t.co/rKpqRSP2Cs pic.twitter.com/arm2yDT0es
Chinese Non-Financial Sector’s Total Debt, 2016 (% of GDP)
The China economy is suffering from the excessive non-financial corporate debt with thousands of "zombie" firms booking losses, kept alive only by continuous bank credit & government subsidies.
The Chinese real estate developer Evergrande is running out of cash and time. Faced with more than $300 billion in debt, it has even asked its employees to lend it money. Now it is seen as a rickety threat to China’s biggest banks. https://t.co/ta0lnK9Pld— The New York Times (@nytimes) September 23, 2021
According to the Bank for International Settlements, at the end of 2020, the total debt issued to non-financial corporations in China equaled 161% of the country’s GDP.
💥 China = engine of global econ growth since GFC— George Gammon (@GeorgeGammon) September 21, 2021
Growth fueled by massive credit/debt creation
Chinese banks could be at risk bc China’s Repo Mkt uses MBS/Corp Debt as “pristine” collateral #Evergrande
If China banks fail, so does econ/global USD cash flows #DollarMilkshake
That was significantly higher than the average for G-20 countries (102%) and even the average for emerging market economies (119%).
The post-GFC increase in non-financial corporate debt can mainly be attributed to a strong expansion in corporate bond issuance (with declining quality) as well as a credit boom in China (see the Box in the article for a deep dive on Chinese corporate debt) 3/10 pic.twitter.com/DxcyFqH6pW— Dennis Essers (@DennisEssers) June 16, 2021
Debt owed by China’s non-financial corporates amount to 158% of GDP, dwarfing the average EM corporate debt ratio of 63.5% of GDP.