JPMorgan_Econ_FI-China_s_macro_leverage_and_policy_implications-112981068_9页_1mb

Analysis: China's macro leverage has increased significantly since 2020 due to lower nominal GDP growth and fiscal.monetary stimulus. Non-financial debt reached 304% of GDP in 2024, while government debt rose by 2.7 percentage points, indicating a shift from non-government to government debt. Corporate debt growth slowed, and household debt stabilized. Policymakers anticipate further borrowing to boost GDP, but interest rate lowering helps mitigate the burden. Although fiscal policy room exists, authorities face constraints that limit reliance on stimulus measures. The intended market may experience asymmetric pressure if rates are poised to rise, alongside risks from asset valuation during distress. The study underscores policy redirection and structural reforms as crucial for debt management, advocating reforms to foster a consumptionmodel and financial upgrades. The research stresses prioritizing nominal GDP growth to curb future debt escalations.

Policy Actions:

• Enhance consumption and invest in social welfare to promote sustainable economic growth.
• Address the debt issue through reforms, shifting the economy from investment-oriented to consumption-drivenfocus.
• Adopt equity financing models in financial systems to mitigate risks and improve efficiency.
• Offer transparency and predictability to non-state sectors to bolster fiscal policy effectiveness.