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Chinese household debt has risen in an “alarming” pace as property values have soared, analysts have said, raising the risk that a real estate downturn could wreak havoc on the world’s second largest economy.

Loose credit and changing habits have rapidly transformed the country’s famously loan-averse consumers into enthusiastic borrowers.

Rocketing property prices in 民間二胎 recently have seen families’ wealth surge.

‘This is just the start’: China’s passion for foreign property

But at the same time they have got fuelled a historic boom in mortgage lending, as buyers race to get about the property ladder, or invest to make money from the phenomenon.

Now the debt owed by households inside the world’s second largest economy has surged from 28% of GDP to more than 40% in the past five-years.

“The notion that Chinese people tend not to like to borrow is clearly outdated,” said Chen Long of Gavekal Dragonomics.

The share of household loans to overall lending hit 67.5% within the third quarter of 2016, over twice the share of year before.

But this surge has raised fears a sharp drop in property prices would cause many new loans to go bad, causing a domino result on rates of interest, exchange rates and commodity prices that “could grow to be a global macro event”, ANZ analysts said inside a note.

While China’s household debt ratio remains lower than advanced countries including the US (nearly 80% of GDP) and Japan (more than 60%), it offers already exceeded that relating to emerging markets Brazil and India, and when it keeps growing at its current pace will hit 70% of GDP within a few years. It has some path to take before it outstrips Australia, however, which includes the world’s most indebted households at 125% of GDP.

The ruling Communist party has set a target of 6.5-7% economic growth for 2017, and also the country is on the right track hitting it thanks partly to a property frenzy in main cities as well as a flood of easy credit.

But keeping loans flowing at this sort of pace creates such “substantial risks” that it could be described as a “self-defeating strategy”, Chen said.

China’s total debt – including housing, financial and government sector debt – hit 168.48 trillion yuan ($25 trillion) at the conclusion of last year, equal to 249% of national GDP, according to estimates by the Chinese Academy of Social Sciences, a high government think tank.

China is seeking to restructure its economy to create the spending power of their nearly 1.4 billion people a key driver for growth, as an alternative to massive government investment and cheap exports.

But the transition is proving painful as growth rates sit at 25-year lows and key indicators still are available in below par, weighing about the global outlook.

Authorities “desperate” to keep GDP growth steady have considered consumers being a source of finance because “many in the sources of capital from the banks and corporations are essentially used up”, Andrew Collier of Orient Capital Research told AFP.

Individuals have considered pawn shops, peer-to-peer networks and also other informal lenders to borrow cash against assets for example cars, art or housing, he explained, to enjoy it on consumption.

Banks may also be driving the phenomenon, Andrew Polk of Medley Global Advisors told AFP.

“Banks have been pushing customers to buy houses because they must make loans,” he was quoted saying, as corporate borrowing has dried up.

Combined with a surge in peer-to-peer lending, with more than 550 billion yuan borrowed within the third quarter of 2016, the risks of speculative investment have risen, S&P Global Ratings said.

Some analysts reason that China is well positioned to manage these risks, and it has lots of space to consider more leverage as families still save double the amount while they borrow, 99dexqpky some 58 trillion yuan in household deposits, as outlined by Oxford Economics.

“From a general perspective, household debt remains in a safe range,” Li Feng, assistant director of your Survey and Research Center for China Household Finance in Chengdu, told AFP, adding that risks across the next three to five years were modest.

But Collier claimed that credit-fuelled spending was really a “risky game”, because when 房屋二胎 flows slow, property prices may very well collapse, especially in China’s smaller cities.

That might lead to defaults among property developers, small banks, and even some townships.

“That will be the beginning of any crisis,” he said. “How big this becomes is unclear but it’s going to be a hard time for China.”