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Economy

China's rising leverage is a growing risk

Other Asian economies should be leery of companies using debt to fund M&As

| China

Worries over China's rising leverage have been growing, especially since the country's ratio of debt to gross domestic product surpassed 250% in 2016. This figure might appear reasonable when compared with developed countries, especially Japan and members of the European Union, but such a comparison only masks the different reality China faces. 

China's GDP per capita is still much lower than that of developed economies, and a good part of its population, as well as many of its small and midsize enterprises, do not yet have full access to credit. Further financial deepening -- an increase in the availability and range of financial services -- will only increase private credit and, ultimately, leverage.

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