Asia debt no longer rising as fast as before

However, there is a trade-off.

Here is the good news, according to an analysis: debt in Asia is no longer rising as briskly as before.

According to a research note from HSBC Global Research, however, this has come at a cost: GDP growth has started to sputter, reflecting the credit intensity of demand in the region.

This means a couple of things, said the report. First, central bankers will be tempted to ease more to help support the leverage cycle (macro-prudential concerns notwithstanding).

In the short term, a further increase in debt may well be necessary to keep things chugging along.

Here's more from HSBC Global Research:

Second, any rate cuts and liquidity injections will likely deliver less of a growth dividend than before.

This is because the credit intensity of GDP growth remains high (and in many places has climbed further), and because there are signs of debt saturation, with households and corporations less and less willing to leverage up further, even if funding costs fall.

China is an interesting case. Growth in shadow banking has been curtailed through regulatory tightening, but banks are now leading the charge to add credit to the economy. Leverage is bound to increase further this year.