Arthur Kroeber

Yeah, I don't have it off the top of my head.

The federal government debt, I think, is around 110% of GDP, something like that.

Total gross debt of all sectors, government, corporations, households, I think would be on the order of around 300% of GDP.

In Japan, it's substantially higher.

You can get into an endless debate on these things where it becomes kind of a numbers game.

But I have a pretty high conviction that China has a – they have a significant macro leverage issue.

So if you look – if you take my numbers and say, well, gross debt to GDP, which by the way are the official numbers of the Chinese government and largely accepted with some structural modifications by the IMF and so forth, 300 percent of GDP –

That is in the ballpark for highly developed economies, right?

It is extremely high for middle income economies.

So if you look at China as a economy that has average per capita income that's kind of like Brazil, one of these countries, China is way more leveraged than any other country of its level of income.

And that is potentially a problem.

So I don't want to make light of the problem because I think it is quite serious and it's an important constraint on policy and it is an important constraint on growth at the moment.

I don't think that it leads to a financial collapse situation because the system is contained and all the debt is denominated in local currencies.

But it imposes attacks on growth, and it is one of the things that makes China's growth more sluggish now than it probably could be.

Yeah.

I think one of the things that you could say about debt historically in China was...

that it tended in general to finance productive assets.

So whether it was industrial production or infrastructure, for many, many years, China was a very infrastructure short country relative to its needs.

And so you could justify quite substantial debt-financed infrastructure investments on the basis that these would deliver good economic returns for many decades into the future.

The case for that is a lot weaker now.