According to the National Bureau of Statistics of China, GDP in China expanded 7.3% in the fourth quarter of 2014 compared to Q4 2013. While almost every country in the World would love to see its economy grow by more than 7% in just one year, (UK GDP increased by 7.3% in the FOUR years to the end of 2014), the annual growth rate in China averaged 9.1% from 1989 until 2014, so it is considered to be a 'slowdown', despite still increasing by around $670bn last year, which is like adding either the Swiss or Argentinian economy every 12 months. And let's not forget that due to its ever growing economy, 7% growth this year is actually the same (in size rather than percentage) as 10% growth just a few of years ago.

Regardless, the percentage of economic growth in 2014 was the slowest since 1990, when the country faced international sanctions in the wake of the 1989 Tiananmen Square massacre. But the more worrying problem is not the fact that economic growth is slowing but how China has managed to maintain such rapid growth in recent years…mainly through credit expansion.

Forever blowing bubbles
According to a February 2015 report entitled 'Debt and (not much) deleveraging' by the McKinsey Global Institute (MGI), China's ratio of total debt to GDP is 282%, which includes borrowing by the government, banks, corporations, and households. By comparison, the US has a total debt to GDP of 269%.

The report states: 'After the 2008 financial crisis and the longest and deepest global recession since World War II, it was widely expected that the world's economies would deleverage. It has not happened. Instead, debt continues to grow in nearly all countries. Since 2007, global debt has grown by $57trn, raising the ratio of debt to (global) GDP by 17 percentage points.'