Bloomberg View – Could China Be Turning A Corner? (Opinion)

The Chinese commodity industry, the most heavily indebted sector of the economy, has been buoyed recently by rising prices.

July 27, 2017

‘Doomsayers have plenty to work with in China. The country’s rapid buildup of debt — reaching approximately 260 percent of GDP, from 160 percent less than a decade ago — seems almost guaranteed to herald a financial crash or at least a major correction, quite likely followed by years of stagnation. If the world’s second-biggest economy ultimately defies the doubters, though, this may well be seen as the year things turned around.

Consider this: China is on track to see its best nominal GDP performance since 2011, even as credit growth remains moderate. First-half GDP numbers show that the economy is now requiring less credit to produce growth — the least in six years, in fact. So far this year, it’s taken 2.9 renminbi worth of new loans to produce one renminbi of new GDP growth. That’s down from an average credit intensity of just over 4 renminbi in the first half of the year between 2012-2016, an almost 30 percent reduction.’

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