Single-mother Li Ying helps explain why household debt in China may be a bigger risk to the giant economy than previously thought.

Faced with expensive medical bills to treat breast cancer, the 38-year-old nurse from Heilongjiang in northern China is struggling to repay her mortgage and relies on financial support from her wider family to pay for her healthcare.

To cut household costs, she waits until the local food market is about to close before buying because that is when remaining fresh produce is sold at a discount.

“People say that when it’s about to close is the time that produce is cheapest,” said Li. “So now I go at that time.”

Li’s experience shows the vulnerability of Chinese consumers, who are taking on record amounts of debt even as income growth slows, adding to the challenge for policymakers of preventing the economy from slowing too quickly.

China’s household debt as a proportion of GDP has more than doubled to 40.7 per cent in less than 10 years. While developed nations have higher rates of household debt, Chinese families are much more leveraged because income is lower and so proportionately the costs of social welfare from pensions to healthcare are much higher.

At the end of 2014, the out-of-pocket health spend in China as a percentage of total expenditure was 32 per cent, compared to 9.7 per cent in Britain and 11 per cent in the US, WHO data shows.

“Household debt leverage is very alarming, even though the aggregate amount is controllable,” said Wan Zhe, chief economist at China National Gold Group Corporation, visiting researcher at Chongyang Institute for Financial Studies, Renmin University of China.

“The first issue is that household debt has risen too quickly, the second is that it has risen too quickly as a proportion” of GDP and disposable income, said Wan.

Underlining these concerns, authorities are trying to calm a property rally. In the latest move, regulators told banks to limit the issuance of home loans, the Shanghai Securities Journal reported.

The balance of retail mortgages at the end of the third quarter hit 16.8 trillion yuan (€2.3 trillion), more than a third higher than a year earlier, China central bank data shows.

More broadly, consumer debt financed by Chinese banks has grown sharply, from 3.8 trillion yuan at the end of 2007 to 17.4 trillion yuan at the end of last year, a compound annual growth rate of 21 per cent, Fitch Ratings said in a report.

But the growth in income has been much more modest, rising 6.3 per cent in January to September compared with the year-earlier period, the weakest pace since 2013 when the National Bureau of Statistics first started issuing the data.

Some economists argue that China’s gross savings rate of 49 per cent of GDP at the end of 2014 suggests little risk to the economy from the build-up in household debt.

But there are hidden problems: down payments for new homes, which are relatively high in China, are often borrowed from family members. Highly-indebted households also cut their spending more in a downturn, which can make a slowdown worse, economists say.