China's household debt has increased sharply in the face of rising property values, fuelling fears that a property downturn could impact the world's second largest economy. Buyers rushing to get on the property ladder have contributed to a boom in mortgage lending, which has caused household debt in the country to rise from 28% of GDP to over 40% in the past five years. The government is trying to stem this tide by introducing measures such as raising interest rates and cutting back on credit for home purchases.
China's household debt has increased sharply in the face of rising property values, fuelling fears that a property downturn could impact the world's second largest economy. Buyers rushing to get on the property ladder have contributed to a boom in mortgage lending, which has caused household debt in the country to rise from 28% of GDP to over 40% in the past five years. However, ANZ analysts warn that a drop in property prices could result in loans going bad, in turn affecting interest rates and exchange rates and becoming a "global macro event".