Stat of the Day

October 09, 2019
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China’s debt levels are unsustainable. China’s private nonfinancial sector credit is roughly 2x its nominal GDP. That ratio compares to 1.6x for the US and Japan and 1.5x for the Eurozone.

Moreover, four-fifths of all credit resides on bank balance sheet in the mainland – a much higher ratio than those of peer economies.

This is not sustainable, especially with the recent economic data out of China:

  • Hong Kong Retail Sales = -23% Year-over-Year
  • China Manufacturing PMI = Fell to 49.8
  • China Services PMI = Fell to 51.3

After SIX rate cuts to their Reserve Requirement Ratio (RRR), almost every time series data point in rate-of-change terms in at or near cycle lows.

Maybe that’s precisely what they are doing. At a press conference in Beijing Tuesday, PBoC Governor Yi Gang had this to say: “China must avoid massive stimulus, keep debt levels sustainable and maintain a prudent monetary policy stance.”

Stay Tuned, Disciplined & Patient! {TJM}

The Investor & Character Equation (ICE) | S + R = O

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