How is China in so much debt?
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 health of Chinese companies
Encouraged by government calls to support economic growth, companies gorged on cheap credit. 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.
Cities and provinces across the country have accumulated a massive amount of hidden debt following years of unchecked borrowing and spending. The International Monetary Fund and Wall Street banks estimate that the total outstanding off-balance-sheet government debt is around $7 trillion to $11 trillion.
[2] A report by the credit rating agency S&P Global in 2022 estimated that 79 per cent of corporate debt in China was owed by SOEs (the IMF does not break down the proportion of debt owed by SOEs).
Economists have said China is facing several challenges: youth unemployment is rising, consumer prices are falling, a real estate crisis is deepening, and foreign investors are worried.
Consequences of Owing Debt to the Chinese
If China called in all of its U.S. holdings, the U.S. dollar would depreciate, whereas the yuan would appreciate, making Chinese goods more expensive.
The United States pays interest on approximately $850 billion in debt held by the People's Republic of China. China, however, is currently in default on its sovereign debt held by American bondholders.
Singapore is one of Asia's major financial centers. It is also one of the most prosperous countries on the planet. And all this has been achieved without taking on any meaningful public debt. In fact, very much like Norway, Singapore has more assets than debt.
- Japan. Japan has the highest percentage of national debt in the world at 259.43% of its annual GDP. ...
- United States. ...
- China. ...
- Russia.
Federal Borrowing
The federal government borrows money from the public by issuing securities—bills, notes, and bonds—through the Treasury. Treasury securities are attractive to investors because they are: Backed by the full faith and credit of the United States government.
Who is richer USA or China?
Country | Economy |
---|---|
United States | $25.347 trillion |
China | $19.91 trillion |
Japan | $5.396 trillion |
Germany | $4.55 trillion |
If China (or any other nation having a trade surplus with the U.S.) stops buying U.S. Treasuries or even starts dumping its U.S. forex reserves, its trade surplus would become a trade deficit—something which no export-oriented economy would want, as they would be worse off as a result.
![How is China in so much debt? (2024)](https://i.ytimg.com/vi/T1dDIrOCbUo/hq720.jpg?sqp=-oaymwEcCNAFEJQDSFXyq4qpAw4IARUAAIhCGAFwAcABBg==&rs=AOn4CLBdf5ALdFBfZhIRXYCezYvFdF-fZg)
No, Bank of America is not partly owned by China. It is an American bank.
"The likelihood of the prediction that China's GDP will one day overtake that of the U.S. is declining," Eswar Prasad, a professor at Cornell University and a former International Monetary Fund official in charge of China, told Nikkei in a recent interview.
If China economy collapsed all other major economies would have collapsed years ahead. There will not be any country to war, China will need to find ways to rebuild itself and others. However it is highly unlikely a healthy economy like China will collapse. Zero propabiliry in coming decade.
Why did China get into a debt problem? Figures show that China's over-borrowing of the public and corporate sector can basically be traced back to the huge stimulus package and lax monetary policy that Chinese economic authorities introduced during the global financial crisis in 2008-2009.
Li Daokui has estimated that local Chinese authorities had by 2020 run up a much bigger tally of debt than previously realized, at some 90 trillion yuan ($12.6 trillion). Most of this debt came from building infrastructure, much of which is unlikely to generate revenues sufficient to pay off the obligations.
As a result, if the United States and other countries were to stop trading with China, it would disrupt global supply chains and cause economic disruptions in many countries.
China owns 384,000 acres of American agricultural land. That's a 30% increase just since 2019. And on top of that, they own land near an air force base in North Dakota.
- Kazakhstan: $64.2 billion (£51bn) total debt. ...
- Angola: $64.8 billion (£52 billion) total debt. ...
- Pakistan: $68.9 billion (£55bn) total debt. ...
- Venezuela: $112.8 billion (£90bn) total debt. ...
- Russia, $169.3 billion (£134bn) total debt.
What country is in the most debt?
Country/Region | Per capita US dollars | External debt USD Million |
---|---|---|
United States | 98,094 | 34.6 trillion |
United Kingdom | 46,754 | 3.24 trillion |
Japan | 34,832 | 4.34 trillion |
Netherlands | 215,569 | 3.79 trillion |
- Somalia.
- South Sudan.
- Sudan.
- Tanzania.
- The Gambia.
- Togo.
- Uganda.
- Zambia.
Public debt in Russia averaged 15.4% of GDP in the decade to 2022, below the average of 32.5% of GDP for Eastern Europe. Public debt in Russia was 18.9% of GDP in 2022. For more public debt information, visit our dedicated page.
Tax hikes alone are rarely enough to stimulate the economy and pay down debt. Governments often issue debt in the form of bonds to raise money. Spending cuts and tax hikes combined have helped lower the deficit. Bailouts and debt defaults have disadvantages but can help a government solve a debt problem.
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