Subprime Risks Are Rising in China, Experts Warn
As China’s household debt continues to build up despite government-led deleveraging efforts, experts are warning against an accumulation of risks similar to the 2008 subprime mortgage crisis in the U.S. that led to the Great Recession.
Ideally, household leverage – defined as the ratio of household debt to gross domestic product (GDP) – should grow at no more than 2 to 3 percentage points a year, said Zhang Xiaojing, deputy director of the Institute of Economics at Chinese Academy of Social Sciences. Any growth above that rate could bring big risks, he warned.
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