China's debt problem explained. (2024)

FAQs

China's debt problem explained.? ›

The underlying problem is structural. China has raised too much debt for the amount of demand there is in its economy - an imbalance that could get worse before it gets better. The housing market has been the linchpin of Chinese growth. Its success drove local government revenues.

Many pundits blame governments whenever economies crash, but the real cause of China's slump is the long period of fast growth that piled up vulnerable and unsustainable debts. The higher they fly, the harder they fall.

Most of this debt came from building infrastructure, much of which is unlikely to generate revenues sufficient to pay off the obligations. With China's trend growth rate notably lower now than it was, it leaves a burden over the long haul.

The collapse of Chinese property developers and the overhang of debt among local governments have left Chinese financial institutions, private and state-owned, bereft of resources to finance the kinds of projects that would enhance domestic demand and help the economy grow.

Analysts estimate that two-thirds of corporate debt is in the hands of China's sprawling state-owned enterprises, many of which are unprofitable and inefficient.

As a result, totals from January 2023 are lower than reported. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).

China is one of the United States's largest creditors, owning about $859.4 billion in U.S. debt. 1 However, it does not own the most U.S. debt of any foreign country. Nations borrowing from each other may be as old as the concept of money.

Public sector debt was RMB 30.3 trillion (53.2% of GDP) while private sector debt (including both household and non-financial corporate sector) amounted to RMB 103.5 trillion (181.9% of GDP). The banking sector is still the biggest lender in China.

China economy overtaking U.S. is increasingly unlikely: ex-IMF official - Nikkei Asia.

China was expected to experience a rip-roaring recovery after it lifted strict COVID-19 restrictions. But almost a year after the measures ended, the Chinese economy seems to be stumbling. Prices have fallen. Exports and imports have plummeted.

Who owes the US money? ›

In total, other territories hold about $7.4 trillion in U.S. debt. Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion. In isolation, this $7.4 trillion amount is a lot, said Scott Morris, a senior fellow at the Center for Global Development.

The national debt of the United States is the total national debt owed by the federal government of the United States to Treasury security holders. The national debt at any point in time is the face value of the then-outstanding Treasury securities that have been issued by the Treasury and other federal agencies.

United States. The United States boasts both the world's biggest national debt in terms of dollar amount and its largest economy, which resolves to a debt-to GDP ratio of approximately 128.13%.

Actual growth seems below the official figures; there is substantial deflation; the housing market has yet to stabilize; and the domestic stock markets have fallen significantly. Domestic confidence is flagging, and foreign investment in 2023 was at a three-decade low.

In 2023, aggregate local government debt had risen to 92 trillion yuan ($12.58 trillion) and the central government of People's Republic of China ordered its banks to roll over debts in a debt-restructuring. China's gross external debt in 2023 was $2.38 trillion.

China's debt-to-GDP ratio climbed to a new record high in 2023 despite the slow pace of borrowing, reflecting the economy's weakening growth, a new report from a state-backed think tank shows.