The size of China’s debt problem is truly staggering. At last measure, debt of all sorts – public and private and in all sectors of the economy — amounted to the equivalent of $51.9 trillion, almost three times the size of China’s economy as measured by the country’s gross domestic product. This is the highest level recorded in the 27 years since Beijing first began to track such statistics. Matters seem set only to get worse. According to the Beijing-backed National Institution for Finance and Development, local authorities are set to issue new debt next year of some 4 trillion yuan, the equivalent of $570 billion.
China’s debt overhang far exceeds the burdens facing the United States. As recently as 2020, total debt in the United States relative to GDP exceeded China’s. But as of mid-2022, China’s relative debt burden stood 40 percent higher than America’s. If this comparison does not highlight China’s precarious situation, it is worth considering that more developed countries, such as the United States, tend, because of their greater relative wealth, to have higher relative debt burdens and can support them more easily than less developed economies, such as China’s.