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68 Deleveraging, What Deleveraging
Figure 4.25 Productivity growth and the share of working age population
14
China: Productivity growth (%y/y)
13
Total economy
12
11
10
9
8
7
02 03 04 05 06 07 08 09 10 11 12 13
% Share of working age population: 5-year changes
3.0
China: Peak 2005
2.5
2.0
1.5
Japan:
Peak: 1990
2010
1.0
0.5
1995
2000
1985
0.0
-0.5
1980
1995
2015
-1.0
-1.5
-2.0
2000
-10 -5 0 +5 +10
Source: Authors’ calculations based on national accounts and World Bank data.
Since 2008, Chinese total debt (ex-financials) has increased by a stunning 72% of
GDP (Figure 4.26), or 14% per year, a shift almost double that experienced by the
US and UK in the six years that preceded the beginning of their financial crisis
in 2008.
This brisk acceleration has brought the overall leverage of the Chinese
economy to almost 220% of GDP, almost double the average of other emerging
markets (see Figure 2.23 and Table 2.1)
The stunning increase in leverage since 2008 arguably came at the cost of
an inefficient use of resources, as is often the case when leverage increases at
a quick pace. Moreover, the increase coincided with the shift from exportorientated
growth to domestically orientated growth. This possibly exacerbated
the overinvestment problem in China and created conditions of overcapacity in
a number of sectors.