The Economist writes,
Many observers are worried about the rapid growth of bank lending in the Middle Kingdom. Indeed, China's private-sector credit grew to 131% of GDP by the end of 2010, according to a recent financial-stability report by the IMF. However, this partly reflects the unusual dominance of banks in China’s financial system. If other forms of finance are included, such as bonds and equities, China ceases to stand out so much when compared with other countries. Total financial credit is only 2.5 times GDP, not much higher than in Brazil or India, and far less than some of the developed countries now facing more worrying economic difficulties, such as low-growth America, Britain and Japan.
I’d see the chart from a different angle.
The chart reveals of the bias of debt over equity financing where a broad part of today’s distribution of “credit intermediation” has been forged by myriad regulations and mandates. Much of these has been made to promote the interests of the welfare-warfare state via the politically endowed banking sector which has been backstopped by the central banks.
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