199

China's household debt is a surging risk to economy

Financial experts point out to the vulnerability of Chinese consumers, who are currently taking on record amounts of debt even as income growth tends to slow, thus contributing to the challenge for policymakers of preventing the Chinese economy from slowing too quickly.

China's household debt as a proportion of GDP has more than doubled to about 40.7% for less than 10 years.  Well, while developed nations boast higher rates of household debt, Chinese families turn to be much more leveraged. It’s because income is lower and therefore proportionately the costs of social welfare from healthcare to pensions are much higher.

At the end of 2014, the out-of-pocket health spend in this Asian country as a percentage of total expenditure happened to be 32%, compared to 9.7% in the United Kingdom and also 11% in the United States, as World Health Organization data reveals.

Household debt leverage appears to be extremely alarming, especially considering that the aggregate amount is quite controllable.

To withstand this tendency the Chinese government is trying to calm a property surge. For instance, the regulators have recently ordered banks to restrict the issuance of home loans.

Scroll to top