₿as Elbers

For years now, China has been making headlines with disappointing economic growth numbers. This has everything to do with the huge mismatch between China's potential GDP growth and the target GDP growth of 5% per year. - China's population is old, and aging significantly limits potential GDP growth. - China's fertility rate is extremely low, with Chinese women giving birth to just one child on average. - China's labor force population is shrinking. - China's overcapacity in the housing market remains high, leading to falling prices and a decline in consumer confidence. So what does China do to keep growing? The same as every other aging economy on the planet: issue debt to buy GDP growth. In China, Local Government Financing Vehicles are ordered by the central government to issue debt to buy GDP growth. If you only look at the debt-to-GDP ratio of the central government, you are missing China's debt-growth dynamics. It is no surprise at all that the debt-to-GDP ratio in China has risen even faster than in many Western countries like the United States or France. It's the totally unrealistic 5% GDP growth goal that forces Beijing to use massive amounts of debt to reach its targets.