(Bloomberg) -- Chinese non-financial corporate debt is rising again as a percentage of gross domestic product in 2018 following a year and a half of deleveraging from its mid-2016 record, according to new data from the Bank for International Settlements.
The ratio jumped to 164.1 percent in the first quarter from 160.3 percent in the final three months of 2017, erasing more than half of the progress Chinese companies had made in reducing debt loads since the ratio topped out at 166.9 percent in the second quarter of 2016, the BIS data, published September 23, show.
China’s government is looking at ways to counter the effects of an ongoing trade dispute with the U.S., which is set to knock half a percentage point off of Chinese GDP growth, according to Bloomberg Intelligence estimates.
The BIS data, which show a reversal took place even before the two countries began imposing tariffs on each other’s exports earlier this year, indicate private-sector deleveraging may now be even more difficult to achieve.
In 2017, "faster GDP growth allowed the authorities space to operate tight monetary policy. As a result, debt growth slowed," Freya Beamish and Miguel Chanco, economists at the independent research firm Pantheon Macroeconomics Ltd, wrote in a report published Wednesday. "That benign backdrop has now dissolved, with the debt ratio ticking up again in Q1. Real GDP growth is slowing, while the increase in our deflator also is moderating. As a result, the authorities are withdrawing from their tight stance."
A majority of analysts now expect China’s central bank to inject additional liquidity into the financial system in the final months of the year to support the economy as the outlook darkens, according to a Bloomberg survey.
To contact Bloomberg News staff for this story: Matthew Boesler in Beijing at mboesler1@bloomberg.net
To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Jeffrey Black, Paul Jackson
©2018 Bloomberg L.P.
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