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China’s total debt: 200 percent of GDP

China debtChina, the second largest economy in the world has big problems with debt, according to CNN Money, which shows that housing boom based on credit continues to increasingly bury China in debt.

This is based on a survey of Swiss bank UBS which calculated that China’s government debt would reach the level of 15% of GDP. It would increase to 55% of GDP if counting local governments and government agencies debt.

Moreover, if taking into consideration the debt of companies and households, China’s total debt would reach 200% of GDP, writes CNN Money, which shows that there are countries that are even worse at this, including the United States and Japan. The difference is that in China’s case it’s about emerging economies, and of these, China has the largest total debt.

Swiss bank analysts say that China’s debt is a concern, even though the country escaped a hard landing of the economy.

In an analysis published yesterday, Mark Mobius, Executive Chairman of Templeton Emerging Markets Group, says that the Chinese government has over $3 trillion in reserves. He also mentioned that “It is a bit of an exaggeration to say that the BRIC countries are facing major problems.” BRIC is an acronym for Brasil, Russia, India and China.

“Chinese equity markets have been volatile, as bouts of enthusiasm have often been followed by fears of government tightening measures. The property market has presented the Chinese government with a great challenge. It needs to maintain prices at affordable levels but must also ensure that its price control mechanisms do not cause a crash in property price. China’s economic data has generally remained positive. As we said more than a year ago when there were questions as to whether China was going to have a soft or hard landing, we did not think that China was going to land at all but that it would keep on growing at a robust pace. Exports have remained resilient while domestic consumption is picking up rapidly as wages rise and disposable income increases. The Chinese government has over US$3 trillion in reserves, and thus its ability to stimulate the economy when needed cannot be questioned,” added Mobius.

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