China-U.S. fact of the day

by  Tyler Cowen in

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J

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in the replies on twitter "Total credit debt is around $1t. That 2t is total credit line. More alarming is amount of 6-month or longer pass due doubled from 2014."

Dick the Butcher - You Know Where This Is Going

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Per US bank regulatory policy, (open-ended) retail credit card balances over 180 days past due are ti be charged off.

chuck martel

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There are a lot more Chinese and they must have a better grasp of the concept of "leverage".

Matthew Young

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Right.
The missing ingredient is deposits, loan to deposits. It may simply be the case that individuals manage larger accounts rather than rely on institutions.

vimal vora

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I am having a hard time believing/validating the $2t... someone in the twitter comments said:

Total credit debt is around $1t. That 2t is total credit line. More alarming is amount of 6-month or longer pass due doubled from 2014.

Again, no sources, but the $1t seems a lot more believable.

Samuel

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According to a Chinese research report * published in late 2017, Chinese credit card debt is expected to reach 15万亿元 in 2019 (compared to 9.8 in 2017). That's 15*10,000*100 million Yuan, which is 15 trillion yuan or 2.3 trillion dollars.

* http://www.cs.com.cn/ssgs/hyzx/201712/t20171201_5601905.html

Homo Econoflorensis

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Could this be explained by there being more investment opportunities in middle income countries? Overseas investment money flowing into the country is why China consistently runs a trade deficit... Wait a minute! That's not what's occurring at all! How could this happen? Has anyone told America about this?

Thiago Ribeiro

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So what? They can steal it all from Amerucan workers and Asian nations!

D

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Christopher Balding is a very useful source for clearing up a lot of misconceptions about China. So its a fact that China has 'north korean levels' of capital controls and makes it essentially impossible for foreign corporations to repatriate profits. But the FDI flow into China didn't seem to reflect this at all. Why would billions of dollars be invested in China if the businesses knew they couldn't take it out? Well the answer is that it isn't. FDI includes for some bizzare reason both fresh inflows as well as re-investment and the re-investment levels in China are off the charts compared to others because once you check in you can't check out.

D

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https://mobile.twitter.com/RobinBrooksIIF/status/1007970265513517056

eqdw

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2 trillion in total Chinese CC debt divided by 1.379 billion Chinese people => about $1,500 USD CC debt per person

815 billion in total US CC debt divided by 325 million American people => about $2,500 USD CC debt per person.

These numbers are in the same ballpark, and don't seem that unreasonable to me. What's the mindblowing part?

BC

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I believe China's GDP per capita is about 1/7 that in the US. So, $1500 of debt for an American is more than $10k for a Chinese person, adjusted for income. On the other hand, China's expected growth rate is higher. The right normalization is probably to compare debt to something like present value of expected future income.

Rick Hyatt

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What about the interest rates? Supposedly Chinese households are punished with low interest rates at regulated banks, so they flee to the shadow banking system for savings. If banks have ceilings on interest rates, then credit card companies might as well, making carrying lots of CC debt more attractive. (The CC companies then permit this presumably because they are competing for market share, or cross-subsidizing or incentivizing because they're owned by Ant/Alibaba/Tencent/etc.)

carlospln

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Yes. What is noteworthy about this in the 1st place?

Zaua

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This could just be because mobile payment and online shopping are much more prevalent in China than the US. China’s overall household savings rate is still very high, hence the trade surplus.

Dave Paola

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And they have 6x as many citizens

JWatts

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No. They have 425% of the US population. But about 1/7th the income. If the figure is accurate, that's a very high rate for the Chinese. But I doubt it is accurate.

cbu

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But those owe a lot of credit card debit in China may have much higher income than the average Chinese. It's hard to say without more info.

DF

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Interesting, I wonder what his source is.

This implies a few interesting stats...
US CC debt per capita: $2,510
China CC debt per capita: $1,450

Assuming $39k disposable income per capita in the US and $7k in China, this implies 7¢ per dollar of disposable income in the US versus 21¢ in China!

Brian Donohue

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What doe Chinese numbers for other categories of debt (mortgages, student loans, auto loans) look like? Maybe credit cards are a much bigger channel of credit in China.

Winston M

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Most boomers have inadequate savings. Almost $4 Trillon of Muni debt. White Americans most common age is 58 according to Jed Kolko in 2018.

Stop looking at China, alarm belles should be ringing in US!

The Singularity

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Rest your pretty head - I'll be here before you know it.

thor

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"Mtge $8.94trn, student loans $1.41trn, $1.23trn autos" for the US. What are China's numbers for mortgage debt, auto loans, and especially STUDENT LOANS?

My intuition is that they are much lower, and China cc debt displaces cash needed for consumption of (wickedly expensive) housing, cars, and tuition.

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