Despite China’s total debt reaching an eye-watering 363 trillion yuan ($50.42 trillion) by the end of 2023—equivalent to 288 percent of its GDP—a leading economist from the China Forum 40 (CF40) think tank reassures that these levels are manageable and not excessive.
Addressing rising concerns over China’s mounting debt, Zhang Bin, non-resident senior fellow at CF40 and deputy director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, emphasized on Monday that the sheer volume and rapid increase of debt do not necessarily signal over-accumulation.
“Over the past decade, China has experienced minimal inflationary pressures, with annual consumer price index growth consistently below 2 percent,” Zhang noted. “Moreover, the Chinese renminbi has appreciated by 15 percent against a basket of currencies, highlighting the balanced growth of financial assets and stable purchasing power.”
Zhang drew comparisons to global standards, pointing out that China’s financial assets relative to its GDP are relatively modest. “The financial assets-to-GDP ratios of the United States and Japan are significantly higher at 13.4 and 15.7 respectively, whereas China’s ratio is 3.6. This indicates that China’s financial asset volume is not extraordinary,” he explained.
He argued that traditional metrics like debt leverage ratios may not accurately reflect debt risk. “A prudent total debt growth rate should be in line with achieving a core inflation target of 2 percent,” Zhang suggested. “The key to reducing leverage and the debt burden lies in maintaining low-interest rates and modest inflation.”
Zhang also highlighted the role of government debt in the overall debt landscape. “Government borrowing constitutes a significant portion of total debt growth,” he said. “This borrowing plays a countercyclical role, helping to stabilize overall demand by offsetting fluctuations in private sector spending.”
The economist’s insights offer a different perspective amidst global scrutiny of China’s debt levels, suggesting that the nation’s economic strategies are geared towards long-term stability and growth.
Reference(s):
China's debt not excessive despite high leverage, CF40 expert says
cgtn.com
