Thursday, 1 March 2012

China to the rescue?

If Allister Heath (City A.M. 29th Feb) is right, China needs to get its banking system in order. A new report from Lombard Street Research shows that China's household debt is 29% GDP, net company debt is 76%, gross government debt is 79%. When massive reserves of 43% are factored in, net government debt falls to 36%. and total debt is thus 141%.

On the surface things look okay, but there is an underlying weakness. In the event of a crisis it is already at the limit of what it could absorb. Give it another couple of years and the situation would become unmanageable. Help!

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