World Economy

Three kinds of debt are the biggest problems in China, says economist

Key Points
  • Financial leverage is down, but economic leverage is still high, says Barclays' chief China economist
  • The household debt-to-GDP ratio is still low versus the rest of the world
  • However, corporate, state-owned enterprise and local government debt remain the biggest issues
China property developers remain 'reasonably positive' on 2018

Despite concerns about household debt in China, the biggest problems still come from the corporates, state-owned enterprises and local governments, a Barclays economist said Thursday.

"In terms of financial deleveraging, the PBOC (People's Bank of China) and the financial regulators have done quite a lot of work in the past year. We have seen a slowdown in shadow financing activities and in interbank business and all these mean the risks in the financial systems have reduced compared with a year ago," said Jian Chang, chief China economist at Barclays.

"But in terms of economic deleveraging, I think there is still a long way to go. Particularly, the debt level over GDP remains quite high," Chang, speaking on the sidelines of the Barclays Asia Forum in Singapore, told CNBC.

State-owned companies', private firms' and local governments' debt remain the biggest problems in China, said Chang.

That remains the case despite corporate leverage having stabilized somewhat. Still, "significant work needs to be done," she added.

Outgoing PBOC governor Zhou Xiaochuan recently warned about the pace of growth in household debt levels. But, Chang said, China's household debt over GDP at 40 percent was still much lower than average international levels.