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Discussion Paper
China’s Continuing Credit Boom
Debt in China has increased dramatically in recent years, accounting for roughly one-half of all new credit created globally since 2005. The country’s share of total global credit is nearly 25 percent, up from 5 percent ten years ago. By some measures (as documented below), China’s credit boom has reached the point where countries typically encounter financial stress, which could spill over to international markets given the size of the Chinese economy. To better understand the associated risks, it is important to examine the drivers of China’s expansion in credit, the increasing ...
Discussion Paper
Why Are China’s Households in the Doldrums?
A perennial challenge with China’s growth model has been overly high investment spending relative to GDP and unusually low consumer spending, something which China has long struggled to rebalance. As China attempts to move away from credit-intensive, investment-focused growth, the economy’s growth will have to rely on higher consumer spending. However, a prolonged household borrowing binge, COVID scarring and a deep slump in the property market in China have damaged household balance sheets and eroded consumer sentiment. In this post, we examine the impact of recent shocks on Chinese ...
Discussion Paper
A Closer Look at Chinese Overseas Lending
While considerable attention has focused on China’s credit boom and the rise of China’s domestic debt levels, another important development in international finance has been growth in China’s lending abroad. In this post, we summarize what is known about the size and scope of China’s external lending, discuss the incentives that drove this lending, and consider some of the challenges these exposures pose for Chinese lenders and foreign borrowers.
Discussion Paper
Could Rising Household Debt Undercut China’s Economy?
Although there has been a notable deceleration in the pace of credit growth recently, the run-up in debt in China has been eye-popping, accounting for more than 60 percent of all new credit created globally over the past ten years. Rising nonfinancial sector debt was driven initially by an increase in corporate borrowing, which surged in 2009 in response to the global financial crisis. The most recent leg of China’s credit boom has been due to an important shift toward household lending. To better understand the rise in household debt in China and its implications for financial stability ...
Discussion Paper
How Has China’s Economy Performed under the COVID-19 Shock?
China’s economy was the first to be hit by the COVID-19 outbreak, the first to be locked down, and the first to begin an economic recovery. We examine the impact of the COVID-19 crisis on China’s GDP growth using a set of alternative growth indicators. Our analysis finds that China’s official GDP growth figures over the first three quarters of this year have been broadly in line with alternative indicators and that growth presently is staging a strong rebound and providing a boost to the global economy. However, this rebound faces potential headwinds in the forms of high levels of debt, ...
Discussion Paper
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 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 ...
Journal Article
How Stable Is China’s Growth? Shedding Light on Sparse Data
Policymakers, academics, and market participants have raised many questions in recent years over the accuracy of China’s official economic growth rates, both in terms of levels and volatility. This issue is of considerable importance for policymakers because fluctuations in China’s economic activity can have significant impacts on growth, employment, inflation, and other policy objectives, given China’s large shares of world output, trade, and commodity demand, and its rapidly growing role in global financial markets. This study addresses the question of growth volatility using a set of ...
Discussion Paper
What Happens to U.S. Activity and Inflation if China’s Property Sector Leads to a Crisis?
A previous post explored the potential implications for U.S. growth and inflation of a manufacturing-led boom in China. This post considers spillovers to the U.S. from a downside scenario, one in which China’s ongoing property sector slump takes another leg down and precipitates an economic hard landing and financial crisis.
Discussion Paper
What if China Manufactures a Sugar High?
While the slump in China’s property sector has been steep, Chinese policymakers have responded to the falloff in property activity with policies designed to spur activity in the manufacturing sector. The apparent hope is that a pivot toward production-intensive growth can help lift the Chinese economy out of its current doldrums, which include weak household demand, high levels of debt, and demographic and political headwinds to growth. In a series of posts, we consider the implications of two alternative Chinese policy scenarios for the risks to the U.S. outlook for real activity and ...
Discussion Paper
What if China Manufactures a Sugar High?
While the slump in China’s property sector has been steep, Chinese policymakers have responded to the falloff in property activity with policies designed to spur activity in the manufacturing sector. The apparent hope is that a pivot toward production-intensive growth can help lift the Chinese economy out of its current doldrums, which include weak household demand, high levels of debt, and demographic and political headwinds to growth. In a series of posts, we consider the implications of two alternative Chinese policy scenarios for the risks to the U.S. outlook for real activity and ...