•  China growing at 6% today adds $ billion of GDP compared to $ billion that a smaller China growing by 10% added 10 years ago. •  China contributed to more than one-third of world GDP growth last year, more than the combined contributions of the US, Europe and Japan. Addressing vulnerabilities Against this backdrop of moderating growth, China is also faced with the task of addressing vulnerabilities in its economy and financial system. The chief risk is leverage – both its level and its growth. •  According to the BIS, China’s credit-to-GDP ratio stands at around 250%, having risen by 100% points since end-2008. Nearly 70% of that increase is attributable to corporate debt. •  There are concerns that part of the corporate borrowing has been used to pay off existing loans, rather than being channelled towards productive activities. •  Many of the Chinese firms having difficulty servicing their debt are from the heavy industry sector facing excess capacity. China has the fiscal resources to backstop its financial sector’s liabilities and thereby stave off a systemic financial crisis. But the debt overhang will weigh on corporate investment and present a further headwind to growth. Indeed, with continuing producer price deflation, the real debt burden will keep rising, even as profitability falls. In a good scenario, the debt ratio stabilises at the current level, and then gradually declines as nominal GDP rises faster than credit; in other words, China grows out of its debt problem.
We have gained an increasing understanding that how we finance postsecondary education has significant effects on a variety of critical economic outcomes, including economic growth and inequality. For example, our research suggests that higher student debt and delinquencies reduce household formation and depress homeownership. But there are many important questions still left unanswered. What is the relationship between the amount and type of educational investment that people make and their outcomes? What attributes are associated with borrowers who are more successful at  1  2  Payback Time? Measuring Progress on Student Debt Repayment. BIS central bankers’ speeches  repaying their student loans? Are there particular types of degrees that are associated with better performance with respect to student debt repayment or with better living standards earlier in life? What are the best interventions to help borrowers avoid the consequences of delinquency and default, and to limit any default costs to taxpayers? Do borrowers who use programs like income-based repayment eventually succeed in paying off their debts? How do income-based repayment programs affect important decisions such as labor supply, consumption and household formation? These are important questions for the nation, as the human capital of our citizens is far and away our most important asset, and student loans are an important mechanism for financing needed investments in that asset. But it is very hard to answer these questions with existing data.