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Chinese household debt has risen in an “alarming” pace as property values have soared, analysts have said, raising the chance that the real-estate downturn could ruin 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 real-estate prices in 民間二胎 in recent years have witnessed families’ wealth surge.

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But at the same time they already have fuelled a historic boom in mortgage lending, as buyers race to acquire about the property ladder, or invest to benefit from the phenomenon.

Now the debt owed by households from the world’s second largest economy has surged from 28% of GDP to over 40% in the past 5 years.

“The notion that Chinese people will not like to borrow is clearly outdated,” said Chen Long of Gavekal Dragonomics.

The share of household loans to overall lending hit 67.5% from the third quarter of 2016, a lot more than twice the share of year before.

But this surge has raised fears a sharp drop in property prices would cause many new loans to travel bad, causing a domino impact on rates, exchange rates and commodity prices that “could turn out to be an international macro event”, ANZ analysts said within a note.

While China’s household debt ratio continues to be under advanced countries like the US (nearly 80% of GDP) and Japan (more than 60%), it has already exceeded that of emerging markets Brazil and India, and in case it keeps growing at its current pace will hit 70% of GDP within a few years. It still has some best option 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 the country is on target going to it thanks partly into a property frenzy in primary cities plus a flood of easy credit.

But keeping loans flowing at such a pace creates such “substantial risks” could possibly be 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 end of last year, similar to 249% of national GDP, as outlined by estimates with the Chinese Academy of Social Sciences, a top government think tank.

China is trying to restructure its economy to help make the spending power of its nearly 1.4 billion people a vital driver for growth, instead of massive government investment and cheap exports.

Nevertheless the transition is proving painful as growth rates sit at 25-year lows and key indicators carry on and can be found in below par, weighing on the global outlook.

Authorities “desperate” to hold GDP growth steady have looked to consumers like a source of finance because “many of the causes of capital through the banks and corporations are essentially used up”, Andrew Collier of Orient Capital Research told AFP.

Men and women have turned to pawn shops, peer-to-peer networks and other informal lenders to borrow cash against assets for example cars, art or housing, he said, to invest it on consumption.

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

“Banks have been pushing men and women to buy houses because they must make loans,” he said, as corporate borrowing has dried up.

Along with a rise in peer-to-peer lending, with 550 billion yuan borrowed in the third quarter of 2016, the potential risks of speculative investment have risen, S&P Global Ratings said.

Some analysts argue that China is well positioned to handle these risks, and possesses plenty of room to take on more leverage as families still save double the amount because they borrow, 99dexqpky some 58 trillion yuan in household deposits, according to Oxford Economics.

“From a comprehensive perspective, household debt remains inside a safe range,” Li Feng, assistant director of the Survey and Research Center for China Household Finance in Chengdu, told AFP, adding that risks across the next 3 to 5 years were modest.

But Collier stated 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 may lead to defaults among property developers, small banks, and even some townships.

“That is definitely the beginning of the crisis,” he explained. “How big this becomes is unclear but it’s likely to be a difficult time for China.”