Should we concerned about growing debt levels around the world?
Wolfgang Schaeuble, Germany’s finance minister, certainly seems to thinks so, stating overnight that “debt levels in the global economy continue to give cause for concern”.
As the chart from consultancy firm McKinsey shows, from 2007 to mid-2014, debt levels around the world ballooned by US$57 trillion to $US199 trillion, a figure that represents some 286% of current global output. In 2000 that percentage was at 246%.
Singling out China in particular, Schaeuble noted that “debt has nearly quadrupled since 2007”, adding that it’s “growth appears to be built on debt, driven by a real estate boom and shadow banks”.
Certainly, according to McKinsey’s research, total outstanding debt in China increased from $US7.4 trillion in 2007 to $US28.2 trillion in 2014. That figure, expressed as a percentage of GDP, equates to 282% of total output, higher than the likes of other G20 nations such as the US, Canada, Germany, South Korea and Australia.
With China slowing and expectations for further monetary and fiscal easing growing by the day, the concerns raised by Schaeuble may well amplify from here.