China's Debt Load To Hit 250% Of GDP In 5 Years, IMF Says

From Zero Hedge:

Anyone who follows China knows that the country faces a particularly vexing problem when it comes to debt. The way we explain it is simple: Beijing is attempting to deleverage and re-leverage simultaneously. Needless to say, this isn’t possible, but that hasn’t stopped China from trying, as is clear from the multitude of contradictory policies and directives that have emanated from Beijing over the course of the last nine months.

Admittedly, lengthy discussions about fiscal mismanagement across China’s various provincial governments doesn’t make for the most exciting reading, but it’s hugely important from a big picture perspective. Why? Here’s why:

That's from the IMF and as you can see, local government debt will account for an estimated 45% of GDP by the end of this year. If one looks at what is classified as "general government debt", China's debt-to-GDP ratio looks pretty good - especially by today's standards. Simply counting central government debt and local government bonds, the country's debt-to-GDP ratio is just a little over 20%. Thus, if you fail to include the provincial LGVF debt burden, the effect is to dramatically understate China's debt-to-GDP.
Below, find two charts from the IMF, the first showing China's actual debt-to-GDP (i.e. including LGFV financing) and another showing China's total debt-to-GDP (which includes corporate debt and which you'll note is set to hit 250% of GDP by 2020). We've also included some color from the Fund's debt sustainability analysis.


From the IMF:

Without reforms, growth would gradually fall to around 5 percent in 2020, with steeply increasing debt ratios.

 http://www.zerohedge.com/news/2015-08-15/chinas-debt-load-hit-250-gdp-5-years-imf-says