Read on Twitter
1/9
This is going to be a very technical tweet for debt geeks. According to last week’s PBoC release, China’s debt-to-GDP ratio declined during the first quarter of this year by 2.6 percentage points. On Sunday I said that I disagreed, and seeing the... https://www.scmp.com/economy/china-economy/article/3132511/chinas-debt-ratio-continued-decline-first-quarter-economy
This is going to be a very technical tweet for debt geeks. According to last week’s PBoC release, China’s debt-to-GDP ratio declined during the first quarter of this year by 2.6 percentage points. On Sunday I said that I disagreed, and seeing the... https://www.scmp.com/economy/china-economy/article/3132511/chinas-debt-ratio-continued-decline-first-quarter-economy
2/9
claim repeated in today’s SCMP made me want to figure out how the PBoC came up with its number.
The PBoC data show debt rising by 3.3% during the first quarter of this year. For debt to GDP to have declined by 2.6 percentage points during... https://twitter.com/michaelxpettis/status/1388525156557934592
claim repeated in today’s SCMP made me want to figure out how the PBoC came up with its number.
The PBoC data show debt rising by 3.3% during the first quarter of this year. For debt to GDP to have declined by 2.6 percentage points during... https://twitter.com/michaelxpettis/status/1388525156557934592
3/9
that period, quarterly GDP would have to rise 4.5% quarter on quarter. The NBS says, however, that Q1 GDP rose by 1.6%. Any meaningful measure of China’s debt-to-GDP ratio, in other words, must have gone up during the first quarter of 2021, not down.
http://www.stats.gov.cn/english/PressRelease/202104/t20210420_1816603.html
that period, quarterly GDP would have to rise 4.5% quarter on quarter. The NBS says, however, that Q1 GDP rose by 1.6%. Any meaningful measure of China’s debt-to-GDP ratio, in other words, must have gone up during the first quarter of 2021, not down.
http://www.stats.gov.cn/english/PressRelease/202104/t20210420_1816603.html
4/9
So how did the PBoC do it? There is no correct way to compare an annual debt-to-GDP ratio with a quarterly ratio, but the way the PBoC does it is a reasonable approximation only when changes in quarter-to-quarter data are very small, which clearly wasn’t the case in 2020.
So how did the PBoC do it? There is no correct way to compare an annual debt-to-GDP ratio with a quarterly ratio, but the way the PBoC does it is a reasonable approximation only when changes in quarter-to-quarter data are very small, which clearly wasn’t the case in 2020.
5/9
If you define GDP as the sum of the previous four quarters, the increase in Chinese GDP from the four quarters ending in December 2020 to the four quarters ending in March 2021 was 4.4%. In that case China’s debt-to-GDP ratio can indeed be calculated as having declined...
If you define GDP as the sum of the previous four quarters, the increase in Chinese GDP from the four quarters ending in December 2020 to the four quarters ending in March 2021 was 4.4%. In that case China’s debt-to-GDP ratio can indeed be calculated as having declined...
6/9
by 2.6 percentage points during the period, but this completely distorts what really happened. Any meaningful measure of China’s debt-to-GDP ratio actually rose in the first quarter of this year, but the mechanical application of the formula takes the huge...
by 2.6 percentage points during the period, but this completely distorts what really happened. Any meaningful measure of China’s debt-to-GDP ratio actually rose in the first quarter of this year, but the mechanical application of the formula takes the huge...
7/9
decline in the debt-to-GDP ratio from 2020 Q1 to Q2 – when quarterly GDP rose by 21.1% quarter on quarter, versus a 4.3% rise in debt – and applies part of it to this year’s Q1. There was no decline in the debt ratio this year except through a misapplied formula.
decline in the debt-to-GDP ratio from 2020 Q1 to Q2 – when quarterly GDP rose by 21.1% quarter on quarter, versus a 4.3% rise in debt – and applies part of it to this year’s Q1. There was no decline in the debt ratio this year except through a misapplied formula.
8/9
I'm sorry if this seems a little confusing, but I urge anyone who can do the math and wants to understand how China’s debt-to-GDP ratio has changed last year and this year to do your own debt-to-GDP calculations – at least for the first two quarters of this year.
I'm sorry if this seems a little confusing, but I urge anyone who can do the math and wants to understand how China’s debt-to-GDP ratio has changed last year and this year to do your own debt-to-GDP calculations – at least for the first two quarters of this year.
9/9
The point is that however you decide to calculate it, in any meaningful sense China’s debt-to-GDP ratio didn’t decline during the first quarter of 2021 but rather rose, and by quite a lot.
The point is that however you decide to calculate it, in any meaningful sense China’s debt-to-GDP ratio didn’t decline during the first quarter of 2021 but rather rose, and by quite a lot.
