ANNUAL REPORT

42
Figure 3: New Loans Issued by Chinese Banks, 2008–2016 Q2
(year-on-year)
RMB trillion
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1
2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: The People’s Bank of China via CEIC database.
China’s continued reliance on borrowing from its state-controlled
banks to bolster growth raises concerns about the sustainability
of gains made in the first half of 2016. China’s stimulus
policies are delivering rapidly diminishing returns. According to
Morgan Stanley, it now takes nearly six RMB of additional credit
to generate one RMB of GDP growth. 52 From 2003 to 2008, it
took one RMB of extra credit to generate one RMB of growth; this
ratio rose to two to one between 2009 and 2010, and reached four
to one in 2015. 53
China’s total debt reached a record $27.2 trillion, or 255 percent
of GDP, in the first quarter of 2016, according to data from
the Bank for International Settlements (see Figure 4).* 54 While
China’s overall level of debt is a concern, more alarming is the
speed at which it has amassed—the country’s total debt was only
148 percent of GDP in 2007. 55 In particular, the rapid growth in
China’s corporate debt—which stands at 169 percent of GDP—is
worrying. 56
* China’s total debt as a proportion of national income is comparable to that of the United
States (251 percent of GDP at the end of 2015), but is much higher than in other developing economies.
For instance, at the end of 2015, India’s total debt was 129 percent of GDP, while Brazil’s
was 149 percent of GDP. Bank for International Settlements, “Total Credit to the Non-Financial
Sector (Core Debt),” May 27, 2016.