China’s central bank recently warned that household leverage has little scope to expand, which means there is virtually no sector of China’s economy that can add debt healthily at this point. Last year, household debt rose by a new annual record (7.87 trillion yuan or $1.2 trillion), but household income growth slowed sharply along with services sector activity, and delinquencies among consumer loans are rising. The PBOC’s regulatory crackdowns on fintech firms and property-related lending are consistent with attempts to limit household leverage, but will weaken household consumption in the year ahead.
