People’s Bank of China warns of growing debt and property bubble

China must take steps to curb indebtedness and its booming property prices, argues PBoC chief economist

 
Chinese property prices
A man looks at real estate listings in Beijing. Prices in China's top cities have heated up again this year, renewing fears the country's property market will soon collapse 

China must act to prevent the current bubble-like expansion of its property market, according to Ma Jun, the chief economist of the People’s Bank of China. Speaking to , Ma argued China must take measures to slow down the flow of capital into its booming property market and curb the economy’s rising debt levels, particularly among China’s state-owned enterprises

China must take measures to slow down the flow of capital into its booming property market and curb the economy’s rising debt levels

Increasing levels of debt have been a growing cause of alarm among China watchers over the past few years, particularly as the country’s growth has slowed. As noted: “China’s total debt load rose to 250 percent of gross domestic product (GDP) last year, and the IMF has warned that the high corporate debt ratio of 145 percent of GDP could lead to slower economic growth if not addressed.” China has also faced repeated concern over its rising property prices, with many fearing a property crash is on the horizon – although identifying a bubble in Chinese property is often rather tricky.

In the interview, quoted by , Ma noted “measures should be taken to put a brake on the excessive bubble expansion in the property sector, and we should curb excessive financing into the real estate sector”. A third of all new debt over the past decade has come from rising house prices.“We should take a lot of measures to curb excessive bubbles in the real estate sector, curb the flow of excessive financial resources into the real estate sector”, Ma continued. However, he also pointed out leverage ratios could only be cut in the long term, as attempting to reduce credit and capital flows into the property sector too quickly could harm China’s already slowing economic growth.

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