This Is The Best Chart We've Seen On The Chinese Debt Problem

Talking about a country’s total “debt” is always risky.

For example, if you’re talking about government debt, then it’s important to understand the nature of the debt. Is it in the government’s own currency that they can freely print (like Japan, the U.S., and U.K.)? How much of the debt is external? When looking at private-sector debt, financial debt can complicate the picture (so a country like the U.K. ends up looking like it uses much more debt than it does, simply because finance is a bigger part of the economy).

This chart from Citi looks simply at household and non-financial-sector debt by key regions around the world.

You can see how China’s private-sector debt has surged past everyone, nearing 200% of GDP.

This has become one of China’s primary policy concerns. Leadership is concerned (probably rightly) about the sustainability of an economy that’s built so much on debt. It’s also why the first-ever corporate default, which happened earlier this month, is so worrisome (how many more will there be?).

Bigger picture, it’s why more and more people are talking about China having a “Minsky Moment” when all of this debt build-up will end up in some kind of big, bang crash.

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