China’s Debt Burden Climbs Above 300% of GDP, Analyst Says

China’s technological capabilities will be on display as Chinese President Xi Jinping meets with US President Donald Trump, but analysts warn the country’s state-led growth model is slowing under the weight of rapidly rising debt, Jason Ma reported for Fortune.

China’s overall debt burden now exceeds that of the United States. (Photo: CGTN)

While the recent rise in US federal debt has drawn concern, a broader measure of indebtedness across the public and private sectors shows US borrowing as a share of GDP has declined since 2010.

In contrast, China’s total debt-to-GDP ratio — excluding the financial sector — has doubled during that period and now exceeds 300%, according to Mark Williams, chief Asia economist at Capital Economics.

Williams wrote in a recent note that China’s debt increase has occurred despite weaker household borrowing following the collapse of the country’s real estate market.

At the same time, US federal debt has climbed above 100% of GDP for the first time since the years following World War II.

In China, however, borrowing by corporations and local governments has continued to outpace economic growth, pushing the country’s overall debt ratio even higher.

Williams estimated that nearly 40% of China’s outstanding debt is now owed by the public sector, including local government financing vehicles.

As a result, China’s overall debt burden now exceeds that of the United States, the eurozone, the United Kingdom, and most emerging economies.

According to Williams, only Japan among major economies carries a higher debt load. “China’s current level of indebtedness puts it in a league of its own,” Williams said.