Photo: iStock
Photo: iStock

The leverage ratio of Chinese residents continues to rise, hitting  52.2% in the third quarter of 2018 from 49% in 2017, with an accumulated debt totalling approximately 46.2 trillion yuan, The Paper reported.

“The residents’ leverage ratio can no longer be raised,” warned Li Yang, chairman of the National Institution for Finance & Development. “(The authority) may stop encouraging people to borrow.”

Li believes that the current way to calculate the residents’ leverage ratio using GDP as the denominator is not accurate.

Instead, the denominator should be replaced by the disposable income of residents, as this will result in a leverage ratio of 85%.

Compared with that of the US before the outbreak of the subprime mortgage crisis, which registered 103%, China is clearly facing an increasing risk in residents’ debt.