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Jun 29, 2011

China Government Debt in Pictures

Local Debt in China has increased dramatically in the last 13 years according to Business Insider.
% of GDP is left scale.
Source: Business Insider
This local government debt makes up the biggest part of total China public debt as the Wall Street Journal shows..


Wall Street Journal
But the public Government Debt hasn't been much higer than the last few years as the Economist Shows:






Due to a request by the Economist this graph has been removed. 



The Economist says: So, is there a problem here? I'd say yes and no..



  • The chart (above) indicates one reason why current debt levels aren't too frightening; they're not much higher than they have been across a period in which the Chinese economy grew extremely rapidly...
  • China's debt load is also less problematic than rich-world burdens because its trend growth rate is so high...
  • China also needn't fear foreign creditors...
  • And then, of course, China has those $3 trillion in reserves. So any way you slice it, debt payments are unlikely to place much stress on the Chinese economy...
  • But that's not to say that debts aren't a problem. I think a near-term economic crisis within China is unlikely. But I also think that many of the economic policy choices that make China's debt less of a near-term threat are likely to seriously complicate growth 5 or 10 years down the road. 

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