According to Liu Yuhui, a Professor at the Institute of Economics, Chinese Academy of Social Sciences, China’s economy has fallen into recession.
“In a word, the current economic situation in China is that deflation has begun, and the economy has fallen into the recession,” Liu wrote in an article published recently. The following summarizes his view on the issue of debts.
In the previous 15 months, China’s M2 has increased by more than 40 trillion. But it has not stopped the economy from sliding into deflation.
There are 1.4 billion people in China. According to the statistics of China’s central bank, 700 million people are now in debt. If children and older people are excluded, almost everyone in the country is in debt.
The total debt of the household sector accounts for as much as 137.9 percent of its disposable income, and the debt ratio of American households is about 90 percent in the same period. There is a more than 40 percentage points gap between China and the United States.
The ability of households to pay is constrained significantly. The annual interest payment accounts for nearly 15% of disposable income to cope with such debts. In the same period in the United States, this figure was 7%. From January to February 2023, the total amount of credit in China’s household sector was only 290 billion, less than 300 billion.
The high debt ratio of 137.9 percent today is much worse than the below 80 percent in 2015. This radio doubled in seven years. As a result, the ability and willingness to spend and borrow in the entire economy are rapidly collapsing.
Liu believed a breakthrough leading to China’s economic recovery in 2023 is indeed difficult.
Source: iNewsDB, April 12, 2023