China's debt load rose from $7 trillion in 2007 to $28 trillion by
mid-2014, according to a report published earlier this year by the
consulting firm McKinsey and Co., China.
At 282 % of GDP, China's debt as a share of GDP, while manageable, is larger than that of the United States or Germany
Several factors are worrisome: Half of loans are linked directly or indirectly to China's real estate market, unregulated shadow banking accounts for nearly half of new lending, and the debt of many local governments is likely unsustainable
Kenneth Rogoff has long warned of a potential financial crisis in China.
Rogoff, a professor of economics at Harvard University, accurately predicted the eurozone debt crisis and for years has been telling anyone who would listen that China posed the next big threat to the global economy. He is starting to look right, again.
"In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could," Rogoff said Monday from Cambridge, Massachusetts, repeating a favorite line from Rudi Dornbusch, the German economist. (Rogoff sat in on Dornbusch's class at MIT in 1977.)
Rogoff, who is a chess grandmaster, has made a career of studying financial crises. After the 2008 financial crisis, Rogoff co-authored "This Time Is Different," a seminal book that examined more than a century of financial crises.
Every financial crisis, he and his co-author, Carmen M. Reinhart, concluded, stems from the same simple problem: too much debt.
At 282 % of GDP, China's debt as a share of GDP, while manageable, is larger than that of the United States or Germany
Several factors are worrisome: Half of loans are linked directly or indirectly to China's real estate market, unregulated shadow banking accounts for nearly half of new lending, and the debt of many local governments is likely unsustainable
Kenneth Rogoff has long warned of a potential financial crisis in China.
Rogoff, a professor of economics at Harvard University, accurately predicted the eurozone debt crisis and for years has been telling anyone who would listen that China posed the next big threat to the global economy. He is starting to look right, again.
"In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could," Rogoff said Monday from Cambridge, Massachusetts, repeating a favorite line from Rudi Dornbusch, the German economist. (Rogoff sat in on Dornbusch's class at MIT in 1977.)
Rogoff, who is a chess grandmaster, has made a career of studying financial crises. After the 2008 financial crisis, Rogoff co-authored "This Time Is Different," a seminal book that examined more than a century of financial crises.
Every financial crisis, he and his co-author, Carmen M. Reinhart, concluded, stems from the same simple problem: too much debt.
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