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Canada and China led the world in global borrowing

Jock Finlayson, executive vice president, Business Council of British Columbia (@jockfinlayson )

“At a time when Canada is struggling to hammer out a strategy for managing relations with China, it is good to know we have at least one thing in common with the Middle Kingdom: a seemingly relentless appetite for credit.

The chart, courtesy of my colleague David Williams, shows that China and Canada have outpaced all major economies in the build-up of debt.  Since 2005, debt in Canada has jumped by more than 90 percentage points of GDP; in China, the increase is even greater, 115 percentage points of GDP.  After a dozen years of frenzied borrowing, total debt now sits at roughly 360 per cent of GDP in Canada and 265 per cent of GDP in China.  Most of Canada’s debt accumulation has been driven by households and non-financial corporations.  In China, the broad private sector has also fuelled the debt bomb.  As interest rates and the cost of credit move higher, heavily indebted Canada and China will both be battling some powerful economic headwinds.”

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