China’s Total Debt Load Equals 282% of GDP, Raising Economic Risks


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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

By Pedro Nicolaci da Costa, WSJ Blog,

China’s overall debt load has risen quickly since the global financial crisis. While still manageable, it raises some concerns for investors, the McKinsey Global Institute says in a new report.

The prospect of a major economic slowdown in China is among the key concerns for policy makers and investors in a turbulent global outlook. Many believe the Chinese government has the resources to manage a smooth transition to a slower growth rate without causing a financial crisis.

But the speed of Chinese debt growth, much of it related to real estate, raises risks that an unwinding of the country’s two-decade growth boom might not go down so smoothly.

Here are some key facts from the report.

Total Debt Equals 282% of GDP: That’s how big China’s total debt load, including borrowing by the government, banks, corporations and households, had gotten by the middle of 2014, the report says. That’s far above the average for developing countries and higher than some advanced economies including Australia, the United States, Germany and Canada.


One-Third of Global Debt Growth: China’s economy, the world’s second-largest, has added $20.8 trillion in new debt since 2007, accounting for more than a third of total debt growth globally in that period.


Corporate Debt Soars, Especially in Real Estate: The largest driver of this growth has been borrowing by non‑financial corporations, including property developers. At 125% of GDP, China now has one of the highest levels of corporate debt in the world.



Shanghai or New York? After a steep rise in property values in recent years, some high-end real estate prices in Beijing and Shanghai are starting to approach those of Paris and New York.


The three major risks identified in the McKinsey report:

  1. About half the debt of households, non-financial firms and government is either directly or indirectly linked to real estate.
  2. Rapid growth in lending by local governments, “many of which may not be able to repay”
  3. Around a third of total outstanding debt in China is provided by a highly opaque shadow banking system, made up of various forms of non-bank lending.

“A plausible concern is that the combination of an overextended property sector and unsustainable finances of local governments could result in a wave of loan defaults in China, damaging the regular banking system and potentially creating a wave of losses for investors and companies that have put money into shadow banking vehicles,” the report says.

While damaging to economic growth, the Chinese government “could probably bail out the financial sector even if default rates were to reach crisis levels,” the McKinsey Global Institute said. “This would most likely prevent a full-blown financial crisis.”

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