MNI BRIEF: Stimulus To Push China Debt Ratio's Higher - PBOC

China's overall debt-to-GDP ratio is expected to rise in Q1 2023, as lenders accelerated loan supply and increased holdings of government debt in a bit to boost the economy, said Ruan Jianhong, head of the Statistics and Analysts Department of the People’s Bank of China on Thursday.

Speaking at the PBOC's quarterly press conference, Ruan said the macro leverage ratio will rise to 289.6%, up 8 percentage points from the end of 2022, boosted by robust new lending taking about 70% of additional debt of the non-financial sector. Ruan noted financial institutions offered further support to the economy via holding more government debt which was issued at a front-loaded pace.

Ruan stressed Q1 growth is often the lowest of the year, due to seasonal effect resulting for Chinese New Year, which also pushes up the leverage ratio. The ratio jumped to 281.6% in 2022, rising 9.6pps from 2021 which saw a poor GDP outcome, she said.

Strong counter-cyclical policies to counter the economic slowdown have boosted debt, but their effects to shore up the economy slow, she explained, noting the leverage ratio would stabilize through 2023 as the economy picks up.