Falling Leverage Ratio
The leverage ratio of China’s financial sector continued to fall in the second quarter of the year, retreating to 2014 levels, according to a leading Chinese think tank.
The ratio, measured by assets, decreased to 64.3 percent at the end of the second quarter from 69.7 percent at the end of 2017, according to a report from the Chinese Academy of Social Sciences (CASS).
Meanwhile, the leverage ratio measured by debt dropped to 61.6 percent from 62.9 percent, the report said, noting that stronger regulation is accelerating the deleveraging process of the financial sector.
While the household leverage ratio rose 2 percentage points in the first half of the year, the leverage ratios of non-financial enterprises and the government fell, the report showed.
Household leverage increased at a slower rate than in the same period last year, pointing to low risks in household debts, according to Liu Lei, a researcher with the Center for National Balance Sheet under the National Institution for Finance & Development of the CASS.
“With house prices stabilizing, the household leverage ratio is expected to stabilize in the future,” Liu said.