
Giving credit to China
Paul Jackson. Global Head of Asset Allocation Research and András Vig. Multi Asset Strategist
China’s credit growth has often been a cause for concern, especially the rising importance of shadow banking. In this update to earlier work we acknowledge the growth but see reasons for hope.
Remember China’s shadow banking problem? Five years ago, this was the next big thing that was going to sink China – or so we were told at the time. When we explored this in More pictures of China in 2018, we concluded that China’s shadow banking system had grown rapidly but only to bring it in line with that of the US and leaving it smaller than those of many European countries. If China had a shadow banking problem, then so did other countries.
Before bringing that analysis up to date, it is worth looking at the broader debt situation in China. As outlined in Global debt review 2020, China’s nonfinancial sector debt exceeded 250% of GDP in 2019, as did that of the US, Japan and many European countries (Germany being the honourable exception). Though the level of China’s debt was unremarkable (relative to other large countries), the rate of change was alarming. China’s debt ratio had increased by around 80 percentage points in the most recent 10 years, the biggest increase across our universe of the world’s 25 largest economies.
investment risks
-
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Important Information
-
Data as at 02.10.2020, unless otherwise stated. This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals, they are subject to change without notice and are not to be construed as investment advice.