December 13, 2017

Credit booms are addictive. Credit supports growth and the perception of wealth. Yet credit booms are risky, and are often followed by financial busts and economic slowdowns. The challenge is taming credit without hurting growth.

Mainland China is experiencing a major credit boom. As of end-2016, total social financing—a broad measure of credit—exceeded 200 percent of GDP. The credit-to-GDP gap—a measure of financial vulnerability—is the second highest among 44 economies covered by BIS (after Hong Kong SAR).

How did credit growth contribute to output growth in China? Has credit allocation worsened as the economy became saturated with credit? Can output growth be supported by other means, such as fiscal stimulus? Den Rest des Beitrags lesen »