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An Estimation of China's Leverage Ratio (No 168, 2015)


By Zhu Hongming & Bo Yan, Research Institute of Finance, DRC

Research Report No 168, 2015 (Total 4853)


The aim of the report is to make an estimation of China's leverage ratio. In this report, we measure leverage ratio with "Outstanding Debt/GDP". Following the principles such as interest-bearing, residence, consistency, comprehensiveness, substance over form and data availability, we define debt from the perspective of supply side. Then we estimate China's leverage ratio -- both that of the whole society and those of different sectors such as financial sector, government sector, household sector and non-financial enterprise sector. From the estimation results, we made three findings. First, leverage ratio rose remarkably. By the end of 2014, the leverage ratio of entire society, financial sector, government sector, non-financial enterprises sector and household sector were respectively 213.1%, 22.7%, 73.7%, 109.2% and 38.0%, increasing respectively by 74.0, 6.2, 24.5, 31.3 and 20.0 percentage points over the end of 2008. Second, the increase of leverage ratio of different sectors is markedly different, with non-financial enterprises sector, local government and household sector being the mainstay for the increase of leverage ratio. Finally, the leverage ratio of the central government and household sector remains relatively low, leaving large room for increasing leverage ratio or the leverage adjustment between different sectors.