(CBN Global) April 25 -- China's total debt has risen to a record 2.5 times gross domestic product in the first quarter, far above its emerging-market counterparts. This is comparable to levels in the US and the eurozone and raises the risk of a financial crisis or a prolonged slowdown in growth, the London-based Financial Times warns.
China has turned to supply-side reform throughmassive lending to boost economic growth, bringing total net debt to CNY163 trillion (USD25 trillion) by the end of March, which includes both domestic and foreign borrowing, according to Financial Times' calculations.
These worries are overblown, said Mr. Qu Hongbin, chief China economist and co-head of Asian Economic Research at HSBC Holdings Plc. China's debt level needs to be put in the context of the country's unusually high saving rate and the lack of a mature equity market. HSBC's research illustrates that China's overall debt-to-GDP ratio is still at a very safe level.
Financial institutions are facing increasing credit risks, factors that influence financial market stability also are on the rise, especially as China experiences continued downward economic pressure,People's Bank of China Vice Governor Chen Yulu said on Sunday.