China's total debt surges to $22.7 trillion: Standard Chartered

China's overall debt stood at 142 trillion yuan ($22.7 trillion), or 245 percent of GDP, as of March 31, Standard Chartered Plc estimated.

That's up from 133 trillion yuan, or 233 percent of GDP, at the end of 2013, the bank said, noting that debt expansion slowed to 18 percent year-on-year during the first quarter, compared with 24 percent in the first three months of 2013.

Many foreign institutions have estimated the scale of China's debts using various calculation methods.

Standard Chartered has its own definition of debt, which is based on that of the central bank's "total social financing" concept, with some additional items.

It includes yuan bank loans, foreign exchange loans and entrusted loans (which are included in the calculation of 'total social financing'), as well as cross-border bank lending, offshore bond issues and other credits.

The slowdown of overall debt growth was particularly attributed to changes in foreign-currency bank loans, trust loans, undiscounted bank accepted drafts and outstanding corporate bonds, which slowed more than 50 percent year-on-year in the first quarter.

The bank said that the deceleration partly reflected China's deleveraging efforts, as well as higher interbank yields in the second half of 2013.

The buildup of total debt, unprecedented in recent history, is leading to mounting repayment pressures. The bank estimated that interest payments were equivalent to 13 percent of GDP in March, up from an average of 7 to 8 percent in recent years.

This high ratio is eating up an increasing share of corporate profit and government revenues and crowding out new investment, which makes a pick-up in growth momentum in 2014 all the more difficult to achieve.

The average nominal interest rate on China's debt was about 5.8 percent in the first quarter, down slightly from the average 6 percent rate in 2013, the bank said.

"While we do not believe a debt crisis is around the corner, partly because some of this debt is 'evergreenable', it is clearly dragging on investment and will continue to do so for the foreseeable future," the report said. "This trajectory is unsustainable. "

Behind the credit expansion and slower growth is a painful fact: China's return on investment is declining, the report noted, which raises questions about the nation's credit-fueled, investment-driven model.

Mao Zhenhua, an economics professor at the Renmin University of China, said the unrestrained expansion of State-owned enterprises and local governments in the past few years lay behind the wasteful investment.

Standard Chartered cautioned that the debt burden should be reduced while preventing a collapse in investment.

"The key quandary for policymakers today is not how to deleverage per se, but rather how to deleverage 'beautifully'. You cannot deleverage an economy that is not growing," it said.