R.I.P. Chinese Exceptionalism?
After decades of strong and steady growth, China has developed a reputation for economic resiliency, even as it piles up ever more domestic debt. But the prospect of declining exports, alongside a weakening currency, could derail its debt-defying trajectory.
NEW DELHI – From Argentina to Turkey and from South Africa to Indonesia, emerging markets are once again being roiled by financial turbulence. But let us not lose sight of the biggest and potentially most problematic of them all: China.
Over the past few decades, China’s growth has appeared to violate certain fundamental laws of economics. For example, Stein’s Law holds that if something cannot go on forever, it will stop. Yet China’s debt keeps on rising.
Indeed, according to the International Monetary Fund, Chinese corporate, government, and household debt has increased by about $23 trillion in the last decade alone, and its debt-to-GDP ratio has risen by around 100 percentage points, to more than 250%. That is orders of magnitude above the level at which financial crises normally occur.