(Yicai) Jan. 28 -- The ratio of China’s debt to gross domestic product rose to more than 300 percent last year, mainly as a result of slower nominal economic growth, according to a new research report by an institute under the Chinese Academy of Social Sciences.

The macro leverage ratio -- a measure of total debt relative to nominal GDP -- rose by 11.8 percentage points to 302.3 percent in 2025, exceeding the 10.1 point increase recorded in 2024, the report said.

Although China's real GDP expanded 5 percent last year, nominal GDP only increased by 4 percent, the lowest rate since the start of the reform and opening-up period in 1978, with the exception of 2020 when the Covid-19 pandemic started.

The increase in the macro leverage ratio was mainly driven by weak nominal GDP growth rather than overly rapid credit expansion, Liu Lei, secretary-general of the National Balance Sheet Research Center, a part of the National Institution for Finance and Development, told Yicai.

The ratio will also face some upward pressure this year, Liu noted.

It first crossed the 300 percent line in the second quarter of last year, rising by 2 points during the quarter to reach 300.4 percent by June 30.

Household Deleveraging

The report shows that as private-sector balance sheets went on repairing balance sheets last year, households went through a deleveraging phase, while leverage growth among non-financial companies slowed. For the year, household leverage fell 2 points, non-financial-corporate leverage increased 6.2 points, and government leverage jumped 7.6 points.

The report also notes that amid a deep property market adjustment and weak underlying consumption household deleveraging accelerated each quarter, and annual household debt growth slowed to 0.5 percent, a record low.

Mortgage lending shrank by an estimated 1.5 percent, slightly worse than the 1.3 percent decline in the previous year, and marking the 11th consecutive quarterly contraction since the second quarter of 2023. 

Growth in consumer lending, excluding mortgages, fell to 0.2 percent from 6.2 percent a year earlier, also a record low. Business loan growth slowed to 4 percent, a drop of 5 points from the previous year. With incomes growing more slowly, low- and middle-income groups remained cautious about spending.

Once house prices steady and income and employment expectations improve, a further sharp decline in household leverage is unlikely, Liu said. Instead, leverage is more likely to level off at a low rate. Household debt may also shift away from predominantly mortgage borrowing toward more consumer and business loans, he said.

Debt Efficiency

While the macro leverage ratio is elevated, the real issue is not whether the debt is too much, but rather how efficiently it is used, Liu said. As long as debt can effectively drive economic growth and boost nominal GDP, it will actually help ease pressure on the ratio, he said.

The report suggests that a modest pickup in prices would support stronger nominal GDP growth and reduce the passive upward pressure on the debt-to-GDP ratio. Accordingly, economic policy should prioritize lifting nominal growth and optimizing debt financing structures so that credit expansion more effectively supports real growth while keeping leverage broadly stable.

“By moderately increasing borrowing to expand spending, the government is not only supporting stable growth but is also improving the balance between the numerator and denominator in the macro leverage ratio calculation,” Liu said. “This makes it possible to stabilize leverage through steady growth.”

Editors: Tang Shihua, Kim Taylor