Hello news fans,

Seems like China is not doing too well. Will this lead to increased
aggression or a change in leadership in the decade to come, or perhaps
status quo?

China's debt-to-GDP ratio climbs to record 287.8% in 2023:

https://asia.nikkei.com/Spotlight/Caixin/China-s-debt-to-GDP-ratio-climbs-to-record-287.8-in-2023

China's debt-to-GDP ratio climbed to a new record high in 2023 despite the
slow pace of borrowing, reflecting the economy's weakening growth, a new
report from a state-backed think tank shows.

The macro leverage ratio, which measures total outstanding nonfinancial
debt as a share of nominal gross domestic product, rose to 287.8% in 2023,
13.5 percentage points higher than a year ago, according to a report by
the National Institution for Finance and Development (NIFD).

The expansion of the overall leverage ratio has outpaced the growth of borrowing. The total liabilities of the household, corporate and
government sectors expanded at a slower pace of 9.8% in 2023, largely
unchanged from 2022, and remained at a relatively low level, according to
the report.

The debt ratio held by households rose 1.3 percentage points to 63.5%,
while that of nonfinancial corporates increased 6.9 percentage points to 168.4%. The government debt ratio, meanwhile, expanded 5.3 percentage
points to 55.9%.

"The limited debt expansion and significant rise of macro leverage ratio
in 2023 is mainly due to the slowdown in nominal economic growth," said
the NIFD.

China's real GDP growth, which is adjusted for inflation, beat the
government's target to grow at 5.2% in 2023. But its nominal growth dipped
to 4.6% from 4.8% in 2022, the lowest level in nearly three decades,
reflecting mounting deflationary pressure on the economy.

The fact that nominal GDP growth is lower than real GDP growth "suggests
China is likely growing below its potential growth," Zhang Zhiwei, chief economist at Pinpoint Asset Management, wrote in a note. "More supportive fiscal and monetary policies would help China to restore its growth
potential."

The NIFD also called for greater policy support to invigorate domestic
demand and spur growth. Debt growth below 10% suggests insufficient
financing demand in the private sector, affecting consumption and
investment expenditure, the NIFD said. A further decline in debt growth
will have a more serious impact on the economy, the report said. The only solution to control the leverage ratio is to expand effective demand and
push up nominal GDP growth, it said.

The NIFD estimated that if total borrowing expands by 10% and nominal GDP
grows by 5% in 2024, China's macro leverage ratio will increase by 14 percentage points to exceed 300%.

The government should set the nominal GDP growth target at 7% and commit
to more stimulus if the goal is not met, said the NIFD. Doing so would effectively reverse market expectations and spur economic recovery, it
said.

To boost nominal GDP growth, the report suggested maintaining the fiscal deficit at a certain level, with the central government borrowing more to
help local authorities reduce their debt burdens. The report also called
for interest rate cuts to lower financing costs and coordinated
stimulative fiscal policy to support the economy.

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Read also the original story.

Caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Nikkei recently agreed
with the company to exchange articles in English.

Best regards,
Daniel

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