1. Part A: Global environment

2. Chart A.1 Risk appetite for emerging market assets has fallen
IIF total portfolio inflows to EMEs estimate and equity and currency indices(a)
Sources: Bloomberg, JPMorgan, MSCI, Institute of International Finance (IIF) and Bank calculations.
IIF emerging market portfolio inflows estimate available to end-October.
Equity index is MSCI Emerging Market Index (US$). The MSCI Inc. disclaimer of liability, which applies to the data provided, is available at
Currency index is JPMorgan Emerging Markets Currency Index.

3. Chart A.2 Debt has increased rapidly in China
China non-financial sector debt(a)
Sources: BIS total credit statistics and IIF.
(a) Non-financial debt data are to 2016 Q1. Includes lending by all sectors at market value as a percentage of GDP, adjusted for breaks. Q2 figure uses IIF estimate.

4. Chart A.3 Property valuations have risen sharply in China
House price inflation in China(a)
Sources: Thomson Reuters Datastream and Bank calculations.
House prices for second-hand residential buildings.
Tier 1-city average refers to average house price inflation in Beijing, Guangzhou, Shanghai and Shenzhen.

5. Chart A.4 Outside of China, credit gaps have been declining but remain elevated
Deviation of credit to GDP ratio from long-term trend: emerging economies and Asian newly industrialised economies(a)(b)
Sources: Bank of England, BIS total credit statistics, SNL financial and Bank calculations.
Raw data have been adjusted for breaks.
Credit to GDP gaps use a one-sided HP filter with a (BIS-consistent) smoothing parameter of 400,000. Credit by all creditors to domestic private non-financial sector.
Claims on all sectors relative to CET1 in 2016 Q2. Claims on Brazil in Q3 expected to be significantly lower following the sale of HSBC Brazil to Banco Bradesco.

6. Chart A.5 Sovereign debt positions remain vulnerable in some countries
Forecast real effective interest rate on advanced economy government debt minus GDP growth and 2016 government debt to GDP ratio(a)
Sources: IMF WEO and Bank calculations.
Japan (250% debt to GDP) and Greece (183% debt to GDP) not shown.
Simple average of advanced economy interest-growth differential and debt to GDP over 1998– average figure shows simple average of interest-growth differentials and 2016 average debt to GDP ratio.
Refers to October IMF WEO forecast of average effective interest rate on outstanding government debt deflated by the GDP deflator, minus real growth.

7. Chart A.6 Periphery euro-area economies are vulnerable to a snapback in sovereign bond yields
IMF WEO projected effective interest rate on government debt and recent bond market developments(a)
Sources: Bloomberg, IMF WEO and Bank calculations.
Vertical bars indicate maximums and minimums for ten-year yields since 2011.
Average (2016–21) of the effective interest rate projected in the IMF’s October 2016 WEO.
Axis restricted to 10%. Portugal’s maximum closing yield was 16.6% and Ireland's was 13.8%.

8. Chart A.7 European bank price to book ratios have fallen over the year
Bank price to book ratios(a)
Sources: SNL financial, Thomson Reuters Datastream and Bank calculations.
Aggregates weighted by total assets at end-2015.
‘Core excluding Germany’ refers to banks in Austria, Belgium, France and the Netherlands.
‘Periphery excluding Italy’ refers to banks in Ireland, Portugal and Spain.