Why China shouldn't panic amidst debt woes

Here are 5 compelling reasons.

Bank of America Merrill Lynch said the Chinese government should be alarmed by the rapidly rising leverage, but it does not believe China is on the brink of a debt crisis, especially if the new leaders can take decisive measures to arrest its rising leverage.

Here's more from BofAML:

First, China's central government has a very low debt-to-GDP ratio at 21%, and it has massive cash savings equivalent to 6% of GDP;

(2) Almost all government debt is denominated in RMB and owned by domestic entities, meaning the People's Bank of China can prevent a public debt crisis with its unlimited capability for liquidity supply;

(3) China has huge national savings with US$3.5tn FX reserves, 20% reserve requirement ratio and just 65% loan-to-deposit ratio;

(4) Both the central and local governments own quite large good assets; (5) Despite the slowdown, China still has high economic growth and fiscal revenue growth.

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