Practical analysis for investment professionals
20 March 2014

Poll: What Do the Recent Defaults in China’s Corporate-Debt Market Mean?

Posted In: Economics

From 2008 to 2012, Chinese government debt, at all levels, increased from about 40% of gross domestic product to 53.5%. Yet, when compared with other countries — such as the United States, whose total government debt was 140% of GDP in 2012 — that figure seems relatively paltry. Including private-sector debt in 2012 increases China’s debt profile to 215% of GDP, which also compares favorably with the United States (360% for the same year).

With the announcement of the second default in China’s debt markets, we asked CFA Institute Financial NewsBrief readers if the recent corporate-bond defaults in China reflect a burgeoning systemic risk.

There has been a second default in China’s corporate-debt market. In this context, with which of following statements do you agree most?
Poll: What Do the Recent Defaults in China's Corporate-Debt Market Mean?

The 781 poll respondents answered with a resounding no. Only 14% of respondents felt that these events are the beginning stages of a systemic crisis. Nevertheless, the centrally planned nature of China’s economy and the widespread development of “ghost cities” suggest that China may be lulled into a sense of complacency about its usage of debt. The issue, as always, isn’t just the size of the debt burden; it is also the quality of the projects financed by that debt. Only time will tell.

Do you want to participate in future polls? Sign up for the CFA Institute Financial NewsBrief.

Related content: “What Does the Chaori Default Mean for the Chinese Financial Markets?

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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About the Author(s)
Ron Rimkus, CFA

Ron Rimkus, CFA, was Director of Economics & Alternative Assets at CFA Institute, where he wrote about economics, monetary policy, currencies, global macro, behavioral finance, fixed income and alternative investments, such as gold and bitcoin (among other things). Previously, he served as SVP and Director of Large-cap Equity Products for BB&T Asset Management, where he led a team of research analysts, 300 regional portfolio managers, client service specialists, and marketing staff. He also served as a Senior Vice President and Lead Portfolio Manager of large-cap equity products at Mesirow Financial. Rimkus earned a BA degree in economics from Brown University and his MBA from the Anderson School of Management at UCLA. Topical Expertise: Alternative Investments · Economics

2 thoughts on “Poll: What Do the Recent Defaults in China’s Corporate-Debt Market Mean?”

  1. Aditya Takkar says:

    You seem to have quote the wrong figures. The debt to GDP ratios are overstated. Correct me if I am wrong.
    I am referring to the Wall Street Journal website.

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