In the first three quarters of 2019, China’s macro leverage ratio increased by 5.1, 0.7 and 1.6 percentage points, respectively, up 7.4 percentage points on a cumulative basis. For the whole year, China’s macro leverage ratio is projected to grow by 8 to 10 percentage points, which was 2 to 4 percentage points lower than the spike from 2008 to 2016. Such an increase in the leverage ratio is moderate, given the current priority to stabilize economic growth, and is much smaller than the rise in the leverage ratio by 31 percentage points in 2009.

In the first three quarters of 2019, China’s economy grew by 6.4%, 6.2% and 6.0% respectively, giving rise to concerns over the prospect of economic growth dipping below 6.0%. To stabilize growth, the macro leverage ratio should continue to play its role. Nevertheless, an increase in the leverage ratio alone is not enough. We should also adjust the internal structure of the macro leverage ratio, and resort to other forces to shore up growth. Among various initiatives, it is essential to accelerate supply-side structural reforms, boost confidence, and promote the initiative of various dies.

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