China's private debt is the highest on record - apart from pre-crash Ireland

Losing the run of themselves...

China's private debt is the highest on record - apart from pre-crash Ireland

Peter Morrison / AP

New analysis from Credit Suisse has compared the level of private debt in China to that in Ireland in 2008 before the Celtic Tiger bubble popped.

Analyst Andrew Garthwaite says that a similar property bubble has formed in the world's second-largest economy.

In a recent note, he wrote that the country's economy has been distorted by state policies which have made cheap credit available to both households and businesses.

"Credit to GDP over a seven-year period has increased more than any other country (apart from Ireland previously) and the credit multiplier has fallen by 75% (with credit growth of 13.4% being understated, in our view, and generating only 7% nominal GDP growth); the investment share of GDP is 44% (and has been higher for longer than for any other country); real estate appears a bubble; and exports, financial services (which accounted for a quarter of GDP growth last year) and demographics are all much less supportive," he warned.

He notes that while the situation is precarious, it is not as bad as Ireland where household debt ballooned to 641% of the country's GDP.

"Over a seven-year period, only Ireland saw a bigger increase in the credit relative to GDP," he added.

Some $1tn of new debt has been added in China during the first quarter of 2016.

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