(Bloomberg) -- Twenty years after the Asian financial crisis and a decade since the global credit crunch, the region is swimming in debt.
The debt binge is spread across companies, banks, governments and households and is inflating bubbles in everything from the price of steel rebar in Shanghai to property prices in Sydney. As the Federal Reserve raises borrowing costs, that means debt is again a concern.
Exposure to China’s slowdown, fluctuating commodity prices and currency volatility are just some of the risks. S&P Global Ratings estimates that of the almost $1 trillion in Asia corporate debt they rate that is due to mature by 2021, 63 percent of it is denominated in dollars and 7 percent in euros.
To be sure, there are sizable buffers too. Governments have strengthened their international reserves, hedging of risks has improved and deeper local bond markets offer alternative sources of finance. And while the Fed is tightening, ongoing massive monetary easing in Europe and Japan provides an offset. Interest rates remain low by historical standards and reflation is helping bring down servicing costs.
Still, the pace of borrowing is eye watering. A debt hangover in Asia matters because the region is the biggest contributor to global growth. Asia’s expansion will probably exceed 5 percent in 2017 and 2018, compared with about 3.5 percent for the world, according to the International Monetary Fund.
Here’s a look at the metrics in some of the biggest economies.
China’s total debt likely reached around 258 percent of the economy’s size last year, up from 158 percent in 2005. President Xi Jinping and his government have made curbing excessive credit and leverage a key priority this year though progress appears to be slow.
Much of the borrowing is at the corporate level, a sector that continues to be dominated by debt-laden state-owned enterprises, so-called zombie firms, with the IMF warning that China needs to urgently deal with company debt.
Then there’s local government borrowing and the murky world of shadow financing and off-balance sheet lending. There are already plenty of warning signals, with rising defaults of corporate bonds and the first-ever rating downgrade of a Chinese local-government financing vehicle.
After years of low rates and a property boom that help prop up the economy, South Korea has been left with a hangover.
Record household debt of 1,344.3 trillion won ($1.2 trillion) has reached a level where repayment burdens are hurting consumption, and Korean officials worry that low-income households may default as the Fed’s tightening impacts domestic lending rates.
The country is also among the most indebted in the OECD, with the ratio of household debt to disposable income at 169 percent in 2015, versus the 129 percent average.
Japan is one of the most indebted nations in the world, with a gross government debt burden that is more than 2.5 times as large as its economy. And the government itself sees no prospect that it will be able to reach its target of primary budget surplus in 2020, which would be the first step to stopping the growth in national debt.
However, the nation has substantial investments overseas and domestic assets, which reduce the debt burden on a net basis. In addition, most corporate debt and all government debt is denominated in yen, and the vast majority of the state’s bonds are held domestically, so there is a lower risk of capital flight.
Australia’s household debt-to-income is a record 189 percent -- much of it in mortgages. In the past year the value of housing-related debt outstanding climbed 6.5 percent, compared with just a 3 percent gain in household income, according to central bank Governor Philip Lowe.
Meanwhile, annual wage growth is at a record low and consumer-price growth is weak, meaning Australians can’t inflate away their debts as they have in the past.
“Slow growth in wages is making it harder for some households to pay down their debt,” Lowe said in Melbourne April 4. “For many people, the high debt levels and low wage growth are a sobering combination.”
The demand for debt comes from a scramble to finance property purchases in Sydney -- up 105 percent since 2009 -- and Melbourne where prices are similarly skyrocketing. Part of the demand is driven by record-low interest rates, some by local investors seeking an easy return and to take advantage of tax breaks, and part of it is Chinese investors looking to park cash offshore.