Connect with us


Is China Running Out of Policy Space to Navigate Future Economic Challenges?

After making progress slowing the pace of debt accumulation prior to the pandemic, China saw its debt levels surge in 2020 as the government responded…



After making progress slowing the pace of debt accumulation prior to the pandemic, China saw its debt levels surge in 2020 as the government responded to the severe economic slowdown with credit-led stimulus. With China currently in the midst of another sharp decline in economic activity due to its property slump and zero-COVID strategy, Chinese authorities have responded again by pushing out credit to soften the downturn despite already high levels of debt on corporate, household, and  government balance sheets. In this post, we revisit China’s debt buildup and consider the growing constraints on Chinese policymakers’ tools to navigate future economic challenges.

China’s Waves of Debt

Previous posts have explored China’s credit boom and rise of household debt. China’s policy response to the global financial crisis in 2009 unleashed nearly ten years of uninterrupted growth in debt, with credit to the nonfinancial sector exploding by almost 150 percent of GDP, according to data from the Bank for International Settlements—one of the largest increases in modern history. It was not until 2018 that Chinese authorities were able to briefly stabilize these debt ratios through a hard-fought “deleveraging campaign.”

China’s debt ratio resumed its upward trend in 2019, but then exploded again in 2020 as China was the first country in the world to respond to the pandemic. China’s run-up in credit in 2020 totaled nearly 29 percentage points of GDP but was short-lived, as the credit ratio contracted modestly in 2021. As COVID-19 spread globally, other countries’ policy responses were also associated with rising debt ratios, with China’s increase comparable to that of other countries, as illustrated in the chart below. However, while other major economies in the world are now tightening their monetary policies, expectations are for overall debt in China to rise again in 2022 to stabilize growth. China’s repeated reliance on credit-driven stimulus raises questions about the buildup of risks in the financial system and the extent to which rising debt levels in all three sectors—discussed below—are sustainable and could ultimately hamstring Chinese authorities’ policy options.

China Has Seen a Sharp Run-Up in Debt Levels

Bar chart showing the percentage point change in the credit-to-GDP ratios of China, Japan, the euro area, the U.S., and other emerging markets between 2007 and 2021, in particular highlighting the change from the end of 2019 through the end of 2021.
Source: Bank for International Settlements via CEIC.

One Step Forward, Two Steps Back

As illustrated in the chart below, China’s total nonfinancial sector credit was almost 290 percent of GDP at the end of 2021. Borrowing by the corporate sector—the largest part of China’s total debt—is equivalent to approximately 153 percent of GDP, a figure that is among the highest in the world. China’s deleveraging campaign was effective in curbing runaway growth in shadow credit, but growth in corporate leverage resumed with pandemic-related stimulus. While estimates vary, state-owned enterprises (SOEs) account for around 50 to 60 percent of total corporate debt, with the remainder held on Chinese privately owned corporate balance sheets. Entities known as local government financing vehicles are also classified as corporate debt in China, although a large portion of these debts are assumed to be implicit government debt, as discussed in the next section. Repayment concerns involving corporate debt in China primarily relate to lending to inefficient SOEs and distressed real estate developers, with the latter the focus of authorities’ efforts over the past two years to reduce leverage in the property sector.

Corporate, Household, and Government Debt Have All Increased Notably

Area chart showing increases in China’s government debt and corporate and household credit as a percent of GDP since 2006. Increases in debt have occurred across all three components.
Source: Bank for International Settlements via CEIC.

Household debt accounts for 62 percent of GDP in China and has grown rapidly in recent years, raising concerns around increasingly stretched household balance sheets. China’s household debt has risen to levels that are quite high by developing country standards but remain broadly comparable to those of developed economies. As illustrated in the two charts below, the ratio of household debt to income in China is currently estimated to be in a range above the median for the economies in the OECD, while household debt service ratios have increased steadily and now exceed those in the United States, approaching even Korea.

Household Debt, in Particular, Has Surged

Two-panel chart with a bar chart on left showing the ratio of household debt to disposable income in China, the U.S., the OECD, and Korea, in percent, and a line chart on the right showing the household debt service to income ratios of Australia, Korea, the U.S., and China. As illustrated in the two charts, the ratio of China’s household debt to income is currently estimated to be in a range above the median for the economies in the OECD, while China’s household debt service ratios have increased steadily and now exceed those in the U.S., and possibly even Korea.
Source: Authors’ calculations, based on data from the Organisation for Economic Co-operation and Development and the Bank for International Settlements (BIS) via CEIC.
Notes: The estimation range shown in the left panel uses household debt as reported by the BIS in the numerator and disposable income as reported by the sum of compensation of labor and property income in the flow of funds (lower range) and the household survey (upper range). The lower and upper ranges shown in the right panel use disposable income reported in the flow of funds (labor compensation and property income) and the household survey, respectively.

Mortgage loans make up roughly 63 percent of China’s total household debt (39 percent of GDP). Chinese authorities’ recent focus on curbing excesses in the property sector—and intermittent COVID-related lockdowns—have slowed mortgage growth notably, to under 10 percent year over year as of July after averaging more than twice that pace over the past six years. Property developers’ struggles to complete construction of pre-sold properties have likely added to the debt burdens of Chinese households, who are waiting to move into new properties yet still making rental or mortgage payments on current residences. In response, an increasing number of home buyers in China have threatened to suspend mortgage payments on undelivered homes, increasing financial risks to banks and developers.

Officially recognized central and local government debt in China is moderate by international standards, at about 50 percent of GDP. However, estimates of “augmented” fiscal debt are much higher, at up to 100 percent of GDP for year-end 2021, according to IMF estimates. The sizable gap between these numbers represents debt that has been issued for fiscal purposes—typically categorized as corporate loans—and likely requires implicit fiscal assistance to be serviced or repaid, or that could be recognized as official debt under some circumstances. This “hidden” government debt is almost entirely borne by local governments, which are highly reliant on the property sector for financing and have much less fiscal flexibility than the central government.

Is China Heading for a Financial Crisis?

International experience suggests that rapid buildup of debt is often followed by financial crises or at least extended periods of much slower economic growth. Thus far, China has managed to avoid a severe day of reckoning, and Chinese authorities are still viewed as having considerable policy tools to manage the nation’s economy and associated financial risks

These tools stem from unique features of the Chinese political and financial system. For example, China’s government maintains direct and indirect control of the country’s financial and nonfinancial sectors at the central and local level, including through ownership of most of the banks in the financial system and a significant portion of nonfinancial corporate firms. In addition, China’s domestic economy is shielded from external shocks by its current account surplus, large stock of foreign exchange reserves, and capital controls. Finally, China possesses ample scope to use monetary, credit, and central government fiscal policies to dampen economic fluctuations, as reflected in the response to the pandemic.

Despite this unique array of policy tools, China has not been immune to financial turbulence over the past decade. China experienced an interbank market crisis in 2013, equity market busts in 2007 and 2015, massive capital outflows in 2015-16, a spate of bank failures in 2019, and most recently a crisis in its property sector accompanied by additional pressures on parts of its banking sector.

Against such a backdrop, there are strong reasons to be watchful for signs of a sustained downshift in China’s historical pattern of economic performance. First, there is evidence that China’s credit-driven growth model is facing serious diminishing returns, as shown, for example, in the high and steadily increasing incremental capital to output ratio (shown in the chart on left below) and rising credit intensity (shown in chart on right). The decline in the “GDP bang for the credit buck” suggests that the old playbook of turning on the credit spigots will be less effective than in the past, while leading to the potential for increases in bad debt. Our colleague, Matthew Higgins, has written more extensively on the self-limiting nature of capital accumulation as a growth driver in China.

Is China’s Credit-Driven Growth Model Now Pushing on a String?

The left panel of this two-panel chart is a trend chart showing a high increase in China’s incremental capital to output ratio since 2001, indicating that China’s credit-driven growth model is facing serious diminishing returns. The right-panel is a bar chart showing China’s lower credit intensity from 2004 through 2022:Q2 in trillions of renminbi.
Source: Authors’ calculations, based on data from the National Bureau of Statistics of China and the People’s Bank of China, via CEIC.
Notes: Left panel shows five-year moving average. Incremental capital to output ratio (ICOR) is calculated as the ratio of gross fixed capital formation to GDP divided by real GDP growth. In right panel, data shown for 2022 are through June. Credit intensity of GDP is the ratio of the incremental increase in credit over the incremental increase in GDP on a three-year moving average.

Second, fiscal and monetary policies appear to face political and institutional constraints that may not be readily apparent from the data. On the fiscal side, even though official debt levels appear quite manageable, local governments are experiencing rapidly increasing debt burdens that remain hidden in local government affiliated enterprises and financial institutions. Based on China’s historical precedent, addressing these issues will likely take years of reform and fiscal tightening, which will create an additional drag on growth. On the monetary side, the authorities likely face constraints on cutting interest rates and reserve requirements for fear of sparking capital outflows or weakening banks’ profitability and encouraging additional buildups of risky borrowing.

Finally, China faces other important challenges that will represent a sharp departure from the conditions it has experienced since Deng Xiaoping launched the country on its path of economic reform roughly four decades ago. Most profoundly, China’s demographic profile is aging quickly, which will greatly increase old-age dependency and lead to a reduction in the working population. Moreover, as its share of global trade stops rising, China’s export engine eventually will downshift to a growth rate similar to that of world trade, or perhaps even lower. Against this backdrop, the medium- to long-term outlook for China’s economy will likely hinge more than ever on the quality of its economic and institutional policies.

Hunter L. Clark is an international policy advisor in International Studies in the Federal Reserve Bank of New York’s Research and Statistics Group. 

Jeffrey B. Dawson is an international policy advisor in International Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.

How to cite this post:
Hunter Clark and Jeff Dawson, “Is China Running Out of Policy Space to Navigate Future Economic Challenges?,” Federal Reserve Bank of New York Liberty Street Economics, September 26, 2022,

The views expressed in this post are those of the author(s) and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author(s).

Read More

Continue Reading


Climate-Change Lockdowns? Yup, They Are Actually Going There…

Climate-Change Lockdowns? Yup, They Are Actually Going There…

Authored by Michael Snyder via The End of The American Dream blog,

I suppose…



Climate-Change Lockdowns? Yup, They Are Actually Going There...

Authored by Michael Snyder via The End of The American Dream blog,

I suppose that we should have known that this was inevitable.  After establishing a precedent during the pandemic, now the elite apparently intend to impose lockdowns for other reasons as well.  What I have detailed in this article is extremely alarming, and I hope that you will share it with everyone that you can.  Climate change lockdowns are here, and if people don’t respond very strongly to this it is likely that we will soon see similar measures implemented all over the western world.  The elite have always promised to do “whatever it takes” to fight climate change, and now we are finding out that they weren’t kidding.

Over in the UK, residents of Oxfordshire will now need a special permit to go from one “zone” of the city to another.  But even if you have the permit, you will still only be allowed to go from one zone to another “a maximum of 100 days per year”

Oxfordshire County Council yesterday approved plans to lock residents into one of six zones to ‘save the planet’ from global warming. The latest stage in the ’15 minute city’ agenda is to place electronic gates on key roads in and out of the city, confining residents to their own neighbourhoods.

Under the new scheme if residents want to leave their zone they will need permission from the Council who gets to decide who is worthy of freedom and who isn’t. Under the new scheme residents will be allowed to leave their zone a maximum of 100 days per year, but in order to even gain this every resident will have to register their car details with the council who will then track their movements via smart cameras round the city.

Are residents of Oxfordshire actually going to put up with this?

[ZH: Paul Joseph Watson notes that the local authorities in Oxford tried to ‘fact check’ the article claiming they’re imposing de facto ‘climate lockdowns’, but ended basically admitting that’s exactly what they’re doing...]

I never thought that we would actually see this sort of a thing get implemented in the western world, but here we are.

Of course there are a few people that are loudly objecting to this new plan, but one Oxfordshire official is pledging that “the controversial plan would go ahead whether people liked it or not”.


Meanwhile, France has decided to completely ban certain short-haul flights in an attempt to reduce carbon emissions…

France can now make you train rather than plane.

The European Commission (EC) has given French officials the green light to ban select domestic flights if the route in question can be completed via train in under two and a half hours.

The plan was first proposed in 2021 as a means to reduce carbon emissions. It originally called for a ban on eight short-haul flights, but the EC has only agreed to nix three that have quick, easy rail alternatives with several direct connections each way every day.

This is nuts.

But if the French public accepts these new restrictions, similar bans will inevitably be coming to other EU nations.

In the Netherlands, the government is actually going to be buying and shutting down approximately 3,000 farms in order to “reduce its nitrogen pollution”

The Dutch government is planning to purchase and then close down up to 3,000 farms in an effort to comply with a European Union environmental mandate to slash emissions, according to reports.

Farmers in the Netherlands will be offered “well over” the worth of their farm in an effort to take up the offer voluntarily, The Telegraph reported. The country is attempting to reduce its nitrogen pollution and will make the purchases if not enough farmers accept buyouts.

“There is no better offer coming,” Christianne van der Wal, nitrogen minister, told the Dutch parliament on Friday.

This is literally suicidal.

We are in the beginning stages of an unprecedented global food crisis, and the Dutch government has decided that now is the time to shut down thousands of farms?

I don’t even have the words to describe how foolish this is.

Speaking of suicide, Canada has found a way to get people to stop emitting any carbon at all once their usefulness is over.  Assisted suicide has become quite popular among the Canadians, and the number of people choosing that option keeps setting new records year after year

Last year, more than 10,000 people in Canada – astonishingly that’s over three percent of all deaths there – ended their lives via euthanasia, an increase of a third on the previous year. And it’s likely to keep rising: next year, Canada is set to allow people to die exclusively for mental health reasons.

If you are feeling depressed, Canada has a solution for that.

And if you are physically disabled, Canada has a solution for that too

Only last week, a jaw-dropping story emerged of how, five years into an infuriating battle to obtain a stairlift for her home, Canadian army veteran and Paralympian Christine Gauthier was offered an extraordinary alternative.

A Canadian official told her in 2019 that if her life was so difficult and she so ‘desperate’, the government would help her to kill herself. ‘I have a letter saying that if you’re so desperate, madam, we can offer you MAiD, medical assistance in dying,’ the paraplegic ex-army corporal testified to Canadian MPs.

“Medical assistance in dying” sounds so clinical.

But ultimately it is the greatest lockdown of all.

Because once you stop breathing, you won’t be able to commit any more “climate sins”.

All over the western world, authoritarianism is growing at a pace that is absolutely breathtaking.

If they can severely restrict travel and shut down farms today, what sort of tyranny will we see in the future?

Sadly, most people in the general population still do not understand what is happening.

Hopefully they will wake up before it is too late.

*  *  *

It is finally here! Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.

Tyler Durden Fri, 12/09/2022 - 06:30

Read More

Continue Reading

Spread & Containment

First-ever social responsibility report of Chinese enterprises in Saudi Arabia incorporates BGI Genomics projects

On December 1, 2022, the Social Responsibility Report of Chinese Companies in Saudi Arabia was officially launched, which is the first such report released…



On December 1, 2022, the Social Responsibility Report of Chinese Companies in Saudi Arabia was officially launched, which is the first such report released by the Contact Office of Chinese Companies in Saudi Arabia. BGI Genomics projects in the Kingdom have been incorporated into this report.

Credit: BGI Genomics

On December 1, 2022, the Social Responsibility Report of Chinese Companies in Saudi Arabia was officially launched, which is the first such report released by the Contact Office of Chinese Companies in Saudi Arabia. BGI Genomics projects in the Kingdom have been incorporated into this report.

This event was attended by around 150 representatives of Chinese and Saudi enterprises, Saudi government officials, experts in the field of sustainable development, CCTV, Xinhua News Agency, Saudi Press Agency, Arab News and other media professionals. This Report presents the key projects and best practices of Chinese enterprises to fulfil their social and environmental responsibilities while advancing the Kingdom’s industry development.

Chen Weiqing, the Chinese ambassador to Saudi Arabia, said in his video speech that the Report highlighted Chinese enterprises’ best practices in serving the local community, safe production, green and low-carbon development and promoting local employment. The release of the Report helps Chinese enterprises in the Kingdom to strengthen communication with the local community, laying a stronger foundation for future collaboration.

Epidemic control and accelerating post-COVID 19 recovery

BGI Genomics has been fulfilling its corporate social responsibilities and worked with the Saudi people to fight the COVID-19 epidemic.

In March 2020, Saudi Arabia was hit by the pandemic. The Saudi government decided to adopt BGI Genomics’ Huo-Yan laboratory solution in April 2020. At the forefront of the fight against the epidemic, the company has built six laboratories in Riyadh, Makkah, Madinah, Dammam and Asir within two months, with a total area of nearly 5,000 square meters and a maximum daily testing throughput of 50,000 samples.

By the end of December 2021, BGI Genomics had sent 14 groups of experts, engineers and laboratory technicians to Saudi Arabia, amounting to over 700 people, and tested more than 16 million virus samples, accounting for more than half of the tests conducted during this period. The company has successfully trained over 400 qualified Saudi technicians, and all laboratories have been transferred to local authorities for the operation.

In the post-epidemic era, the Huo-Yan laboratories can continue to make positive contributions to public health, working with local medical institutions and the public health system to make breakthroughs in areas such as reproductive health, tumour prevention and control, and prevention.

Enhancing genomic technology localization and testing capabilities

In July 2022, BGI Almanahil and Tibbiyah Holdings, a wholly owned subsidiary of the Saudi Faisaliah Group, announced a joint venture (JV) to establish an integrated, trans-omics medical testing company specializing in genetic testing.

This JV company will help improve Saudi Arabia’s local clinical and public health testing and manufacturing capabilities, promote the localization of strategic products that have long been imported, contribute to the implementation and realization of the Kingdom’s Vision 2030 roadmap, and significantly enhance local capacity for third-party medical testing services as well as local production of critical medical supplies.

BGI Genomics attaches great importance to fulfilling its corporate social responsibility and has released its social responsibility report for four consecutive years since 2017. Since its establishment, the company has always been guided by the goal of enhancing health outcomes for all, relying on its autonomous multi-omics platform to accelerate technological innovation, promote reproductive health, strengthen tumour prevention and control, and accurately cure infections, and is committed to becoming a global leader in precision medicine and covering the entire public health industry chain.

The company will continue to work together with all stakeholders to contribute to the Kingdom’s Vision 2030 and the Belt and Road Initiative and looks forward to growing with our partners.


About BGI Genomics

BGI Genomics, headquartered in Shenzhen China, is the world’s leading integrated solutions provider of precision medicine. Our services cover over 100 countries and regions, involving more than 2,300 medical institutions. In July 2017, as a subsidiary of BGI Group, BGI Genomics (300676.SZ) was officially listed on the Shenzhen Stock Exchange.


Read More

Continue Reading


Alcohol deaths in the UK rose to record level in 2021

Nearly 10,000 people died from alcohol in 2021.




Deaths from alcohol in the UK have risen to their highest level since records began in 2001, according to the latest data from the Office for National Statistics (ONS). In 2021, 9,641 people (14.8 per 100,000) died as a result of alcohol: a rise of 7.4% from 2020.

The leading cause of alcohol-specific deaths (deaths caused by diseases known to be a direct consequence of alcohol) continues to be liver disease. More than three-quarters (78%) of all alcohol deaths in 2021 were attributed to this cause. The remainder of the deaths were due to “mental and behavioural disorders because of the use of alcohol” and “accidental poisoning by, and exposure to, alcohol”.

Although there is no such thing as a safe level of drinking, and many people would feel the health benefits of reducing consumption, most of the risks of developing health problems and dying are skewed towards those who drink the most.

Between 2012 and 2019 alcohol-specific deaths remained relatively stable. It is no coincidence that deaths rose sharply during the first two years of the pandemic: those that were already drinking at harmful levels increased their consumption further during this period. Although liver disease can take years to develop, this process is accelerated when those drinking at harmful levels increase their consumption further.

Other statistics show that unplanned alcohol-related hospital admissions decreased during this period, which may have meant missed opportunities to provide help for those people experiencing problems with alcohol.

Looking beyond the headline figures, there are important differences in various groups within the population. Alcohol-specific deaths were not spread equally. For example, men were twice as likely to die as women. In 2021, 20.1 men per 100,000 died compared with 9.9 women.

Where you live in the UK matters, too, as deaths in Scotland are the highest, followed by Northern Ireland, Wales then and England – although the gap between the nations seems to be narrowing.

In England, deaths are highest in the north-east of England (20.4 per 100,000), which is twice as high as those in London (10.2 per 100,000). Although rates have increased in all regions; for example, there was a rise of 38% in south-west England from 2019 to 2021. This reflects what is already known about the relationship between deprivation and harm from alcohol. There is a two to fivefold higher risk of dying among lower-income groups compared with those from the higher-income groups.

Reflecting the growing trend of young people drinking less than older age groups, it is those aged 50 to 64 that account for most deaths due to liver disease. In 2021, for example, 39 people aged 25 to 29 died from alcohol-related liver disease, compared with 1,326 of those aged 50 to 59. This is related to a greater number of years of drinking but is also a general reflection that when older adults were younger, they tended to drink more than younger people do now.

Numbers of alcohol-specific deaths, by five-year age group and individual cause. Office for National Statistics – Alcohol-specific deaths in the UK: registered in 2021, National Records of Scotland and the Northern Ireland Statistics and Research Agency

Addressing harms

So what can be done to begin to address alcohol harms? It has been estimated that almost a quarter of drinkers in the UK drink above the recommended low-risk drinking guidelines. So this is a health and social issue that requires a national response. Low-impact initiatives, such as education and awareness raising, may not be enough.

The costs of alcohol to society are significant. A recent review estimated this to be £27 billion annually, with only half of this offset by tax revenue on alcohol products.

Timely access to specialist treatment can help to reduce the health risks associated with alcohol. Unfortunately, there have been significant cuts to funding for this type of intervention.

Around 80% of people classed as dependent on alcohol in England are not currently getting treatment support. While there has recently been extra funding for drug services to try and correct historic cuts, this has not been extended to alcohol. Reversing this by investing in services could help to reduce the rising number dying prematurely from alcohol.

A new strategy is long overdue

The last government strategy for alcohol was published in 2012, so there is a pressing need for a new one. This must address all the ways that the harms from alcohol can be tackled, from marketing and pricing to specialist treatment and recovery services.

A group, led by Liverpool MP Dan Carden, with cross-party support, recently called on the government to initiate an independent review of alcohol harm, along the lines of the review led by Dame Carol Black, which had a significant influence on drug policy and treatment funding.

Without such a review and strategy based on it, the harms caused by alcohol including premature death will continue to rise year after year. So much has changed since the last alcohol strategy in 2012 not least the current cost of living crisis. The outlook for investment in public health looks bleak, added to which this government doesn’t seem willing to curtail the efforts of the alcohol industry in marketing and protecting its products.

Harry Sumnall receives and has received funding from grant awarding bodies for alcohol and other drug research. He sits on grant-awarding funding panels, and is an unpaid scientific adviser to the MIND Foundation.

Ian Hamilton does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Read More

Continue Reading