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Credit To GDP Gap For China Not Slowing Down

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China's Bank Credit To GDP Percentage

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Editor’s remarks:
The credit to GDP gap is the difference between the credit to GDP ratio and the long-term trend of the economy. The Bank of International Settlements recently released data for the first quarter of this year, and the gap for China is worrying. The data is frequently used as an early indicator of a financial crisis and anything over 10% usually means trouble. China this year has hit around 30%. The trend has received surprisingly little attention from investors as they continue to encourage investment in infrastructure from the nation. However, it must be recognised that few nations have as much control of their economy as China does theirs. China has already acknowledged the worryingly high level of debt, and bad debt, and is taking steps to address the issue. How ruthlessly executed the steps are will not be an issue but whether they have come fast enough will be.

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