The China-US sorpasso is looming. I do not mean the much-exaggerated moment when China’s GDP will overtake America’s GDP – which may not happen in the lifetime of anybody reading this blog post – as China slows to more pedestrian growth rates (an objective of premier Li Keqiang.)
The sorpasso may instead be the ominous moment when China’s debt ratios overtake the arch-debtor itself.
I had presumed that this inflection point was still a very long way off, but a new report from Stephen Green at Standard Chartered argues that China’s aggregate debt level has reached 251 per cent of GDP, as of June.
This is up 20 percentage points of GDP since late 2013. The total is much higher than normal estimates, though it tallies with what I have heard privately from officials at the IMF and the BIS.