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Chinese Household Debt Exceeds 60 Percent of GDP

Last week, the People’s Bank of China released data showing that, by the end of last year, China’s household debt accounted for more than 60 percent of GDP. Real estate mortgages accounted for 47 percent of household income, a year-on-year increase of 3.7 percent. Fitch Ratings estimates that the outstanding balance of credit card receivables reached 7.23 trillion yuan (US $1.03 trillion) in the first half of this year.

A Hong Kong based commentator Johnny Y.S. Lau told Radio Free Asia that, in recent years, the government has been encouraging people to invest in real estate. With the soaring housing prices, there has been an oversupply of real estate in many cities. As the US-China trade war continues to slow the economy, the property market and economy may face a crash at any time. Lau said, “In the past, 40 percent (of people’s income) was in bank savings. Now, a lot of money is invested in real estate. With the US-China trade war causing exports to stagnate, cash flow may become a problem, which makes the risk of a crash increasingly apparent. As the second and third tier cities have absorbed a large number of those in the rural populations, the housing prices have been pushed even higher. Now it depends on whether the people’s savings can keep up and on how the authorities regulate property prices.”

At the same time, China’s domestic consumption has weakened compared to previous years. In October of this year, retail sales increased by 7.2 percent year-on-year, the lowest growth in nearly 16 years. Weak consumer confidence has also led to a 10-month consecutive decline in car sales, down to a negative 4 percent growth in October.

Source: Radio Free Asia, December 5, 2019