"Regarding household debt levels, China doesn't rank that high on a global scale, but the pace of growth has picked up in the last few years," People's Bank of China governor Zhou Xiaochuan said Thursday. He didn't expect any action should be taken immediately but said the debt levels should be monitored for quality and a steady pace of growth.
The bigger worry about China has been high levels of corporate and local government debt. The Chinese government has spoken about the need to limit that growth, and most analysts expect authorities will gradually rein it in. But this year, household debt has arisen as another area of concern about financial leverage in China.
"China's household debt has been rising at an 'alarming' pace over the past two years," Citi analyst Li-Gang Liu said in an Oct. 10 note. The report pointed out that outstanding household debt in China has doubled from 29.6 percent of gross domestic product at 16 trillion yuan ($2.41 trillion) in 2012 to 44.3 percent of GDP at 33trillion yuan last year.
Mortgage loans for buying property are the largest driver of that household debt growth, Liu said. Property prices, especially in major Chinese cities, have shot higher as "the returns on property investment were much higher than interest rates on savings and loans."
During a key address at the twice-a-decade party congress on Wednesday in Beijing, Chinese President Xi Jinping reiterated that "houses are for living in, not for speculation," according to global media reports.
"While the comment isn't new, to reiterate it at such an important meeting is highly unusual," Larry Hu, head of greater China economics at Macquarie, said in a Thursday note. Hu does not expect the Chinese government to relax its restrictions on property purchases in the next 12 months.
Reference: CNBC
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