In the second quarter of 2024, China’s macro leverage ratio rose from 294.8% at the end of Q1 to 295.6%, an increase of 0.8 percentage points. This brought the cumulative increase in the first half of the year to 7.5 percentage points. The year-on-year growth rate of real economy debt fell to 8.3%, marking a new low for the 21st century. However, due to even weaker GDP growth, the macro leverage ratio continued to rise passively. For the full year, the ratio is projected to rise by approximately 10 percentage points.

The household leverage ratio declined by 0.5 percentage points. Although housing market transactions picked up following the relaxation of mortgage policies by regulators in May, mortgage demand remained subdued. Overall household loan growth fell to a historic low.

The non-financial corporate leverage ratio edged up by 0.2 percentage points. Policy rates remained unchanged during the second quarter, and overall liquidity was relatively accommodative. Nevertheless, corporate financing demand was limited, and the implementation of regulatory measures to “squeeze out excess financial leverage” further slowed debt growth in the corporate sector.

The government sector leverage ratio increased by 1.1 percentage points. The intensity of proactive fiscal policy in 2024 has so far been lower than in 2023. The volume of newly issued local government special-purpose bonds in the first half of the year fell short of expectations, with Q3 anticipated to be the peak period for new government borrowing.

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