China's debt-servicing costs to top $170bn on growing bond issuances (2024)

FAQs

China's debt-servicing costs to top $170bn on growing bond issuances? ›

The debt-servicing burden is expected to increase 7.8% in 2024 to a record 1.27 trillion yuan ($177 billion), Ministry of Finance data shows. The figure has continued to rise amid a surge in bond issuances to fund economic stimulus and support cash-strapped regional governments.

[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).

The issue has gained more urgency as local governments, especially poorer ones, have been struggling to repay the principal and interest on hidden debt. Compounding the problem is that many have run their coffers down implementing COVID control measures during the three years of the pandemic.

At the end of 2023, outstanding local government debt totaled 40.74 trillion yuan, within the NPC-approved budget limit, including about 15.87 trillion yuan of general debt and 24.87 trillion yuan of special debt.

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.

Debt as a share of GDP has risen to about the same level as in the United States, while in dollar terms China's total debt ($47.5 trillion) is still markedly below that of the United States (close to $70 trillion). As for non-financial corporate debt, China's 28 percent share is the largest in the world.

Nearly half of all US foreign-owned debt comes from five countries. All values are adjusted to 2023 dollars. 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).

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.

If China (or any other nation that has 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 bad is it? China's debt is more than 250 percent of GDP, higher than the United States. It remains lower than Japan, the world's most indebted leading economy, but some experts say the concern is that China's debt has surged at the sort of pace that usually leads to a financial bust and economic slump.

What crisis is China facing? ›

Property crisis

Many of the risks facing China's economy stem from its ailing real estate sector. For decades, China's economy was dependent on a booming property market driven by speculative investment returns. However, this growth was largely driven by debt.

It stood at €148 billion in 2022 (2021: €73 billion) and is estimated to have risen to €240 billion in 2023. Ultimately, consolidated debt is largely repaid through the EU budget, and Member States are therefore involved in financing it through their financial contribution to the EU budget.

China has been grappling with negative consumer prices for several months. No other major world economy faces deflation.

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.

Around 70% of Japanese government bonds are purchased by the Bank of Japan, and much of the remainder is purchased by Japanese banks and trust funds, which largely insulates the prices and yields of such bonds from the effects of the global bond market and reduces their sensitivity to credit rating changes.

At the top is Japan, whose national debt has remained above 100% of its GDP for two decades, reaching 255% in 2023.

In 2018, about 27% of UK debt was overseas-owned, and China was the largest single country in that figure. That suggests that China might own about 15% of UK debt — so about 267 billion.

"China owns $870 billion in U.S. Treasuries that finance our debt. And they either own or have a huge portion of the Chicago Stock Exchange, AMC movie theaters, General Electric's appliance division, General Motors, and Smithfield Foods just to name a few."

The public owes 74 percent of the current federal debt. Intragovernmental debt accounts for 26 percent or $5.9 trillion. The public includes foreign investors and foreign governments. These two groups account for 30 percent of the debt.