Research: China Enters Danger Zone as Fed Tapers

China, Hong Kong and India are in a “high-risk danger zone” because their monetary policies have stayed too loose over the past four years, according to Nomura Holdings Inc.

A June 28 report by the bank’s economists and strategists showed the average ratio of domestic private debt to gross domestic product across Asia had ballooned to 167 percent in 2012 and most of the region’s property markets are “frothy.” The debt ratio has increased by over 50 percentage points in Hong Kong and Singapore and between 30 and 40 points in Malaysia, South Korea, China and Thailand.

A measure of monetary policy based on output gaps and inflation shows that interest rates have also been persistently below what economic models suggest, and even more so if the financial cycle is accounted for, the report said.


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