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The war on Ebola
Its debt will not drag down the world economy, but it risks zombifying the country’s financial system
OF THE many things that are worrying investors around the world, from tumbling oil prices to the spectre of recession and deflation in Europe, one of the most important, and least understood, is China’s debt. For the past few years China has been on a borrowing binge. Its total debt—the sum of government, corporate and household borrowings—has soared by 100% of GDP since 2008, and is now 250% of GDP; a little less than wealthy nations, but far higher than any other emerging market (see article).
Since most financial crashes are preceded by a frantic rise in borrowing—think of Japan in the early 1990s, South Korea and other emerging economies in the late 1990s, and America and Britain in 2008—it seems reasonable to worry that China could be heading for a crash. All the more so because the nominal growth rate, the sum of real output and inflation, has tumbled, from an …
Link to article: www.economist.com/news/leaders/21625785-its-debt-will-not-drag-down-world-economy-it-risks-zombifying-countrys-financial?fsrc=rss