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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.
Case studies 69 Figure 4.26 Chinese total debt and breakdown 220 China: Total debt ex-financials (% iof GDP) 210 200 190 180 +72% 170 160 150 140 05 06 07 08 09 10 11 12 13 China: Total debt ex-financials breakdown (% of GDP) 180 160 140 Private 120 100 80 60 40 Public (central and local governments) 20 02 03 04 05 06 07 08 09 10 11 12 13 Source: Authors’ calculations based on national account data. Indeed, while investment in previous years was mostly concentrated in manufacturing and in sectors affected by the additional demand created by the export boom following the WTO accession, the credit boom in 2008 and thereafter spurred huge investments in housing and infrastructure. These sectors, although effective in supporting the economy in the short term, failed to boost potential output and actually created excess capacity in related sectors, like steel. In turn, overcapacity in a number of key sectors led to downward pressure on production prices. Since 2008, the slowdown in measures of growth to about 7% (Figure 4.24) has been accompanied by a fall in underlying domestic price pressures and slower growth in nominal GDP.
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Geneva Reports on the World Economy
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International Center for Monetary a
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International Center for Monetary a
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Acknowledgements We thank Susan Lun
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List of Conference Participants Edm
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List of Conference Participants xi
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List of Conference Participants xii
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Foreword Since 1999 the Geneva Repo
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2 Deleveraging, What Deleveraging 1
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4 Deleveraging, What Deleveraging S
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2 Global debt analysis: Deleveragin
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Global debt analysis: Deleveraging
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Global debt analysis: Deleveraging
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