In the third quarter of 2023, China’s macro leverage ratio rose from 283.3% at the end of Q2 to 286.6%, an increase of 3.3 percentage points. Cumulatively, the leverage ratio increased by 13.5 percentage points over the first three quarters. Despite the stock of real economy debt growing at a year-on-year rate of only 9.3%—near the lowest level since 2000—the faster decline in nominal GDP caused a passive increase in the macro leverage ratio. For the full year, the leverage ratio is projected to rise by 12 to 13 percentage points, with a marginal decline anticipated in Q4.

The household sector recorded the smallest increase in leverage, rising by just 0.3 percentage points. Year-on-year growth in residential mortgage lending remained negative for the second consecutive quarter. The leverage ratio of the non-financial corporate sector continued to increase, up by 1.2 percentage points. While corporate debt growth remained relatively stable, investment growth continued to weaken. The government sector experienced the largest increase in leverage, up by 1.8 percentage points, though the strength and effectiveness of fiscal policy remained limited.

Currently, the focus of counter-cyclical macroeconomic policy lies in expanding the central government's balance sheet. From a policy design perspective:
– Policies that are operationally feasible and can be implemented promptly are more likely to provide market participants with a tangible sense of support;
– Centralized and forceful measures are better able to swiftly shift expectations;
– Clear, directional, and high-level policy signals serve as the ultimate stabilizing anchor for market confidence.

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