cross-posted from: https://lemmy.sdf.org/post/60304322
Original Financial Times article is behind paywall.
China’s growing debt burden limits the authorities’ ability to provide massive stimulus to boost economic growth and revive weakening domestic demand. About it writes the Financial Times (FT) with reference to studies of public finances of China.
According to the analysis of the non-profit research center Conference Board, this year debt service will require 19.2% of the total state budget. In 2014, this figure was 12%.
[…]
The debt problem is particularly acute in China at the level of local authorities, where interest payments on debts have grown by an average of 16% annually since 2014. According to the forecast of the center, in 2026, the aggregate interest payments on debts in central and regional governments will amount to about 1.4 trillion yuan ($ 209 billion).
[…]
“Debt servicing is becoming a significant constraint on local budgetary opportunities,” said Yuhan Zhang, lead economist at the Conference Board.
China’s debt has skyrocketed in the past few years due to an investment-driven growth model […] China’s public debt will reach 122% of GDP, which is 48% higher than the level that was before the coronavirus pandemic began in 2020.
[…]
A five-year slump in the Chinese real estate sector has worsened the financial position of households and regional authorities, despite Beijing’s pledge to boost domestic demand more actively. In the second quarter of 2026, the country’s economic growth slowed to 4.3%, below the target range of 4.5-5%. The newspaper points out that this is due to weakening retail sales and a sharp decline in fixed investment.
[…]
China’s military spending accounts for 42% of central government spending, accounting for 15% of the total state budget.
[…]
Pointing at other countries than US for “debt problems” is somewhat of a joke. France has lower interest rates than US, and will eventually adopt a 3% deficit ceiling budget (EU requirement). US is pushing 8% deficits, with below 2% real growth
China is extremely economically healthy. Not only are long term rates below 2%, they have 5% real growth. Their debt is 90% owned by banks that government has 70% ownership in. Local governments get plenty of cash from Beijing, and their debt is on infrastructure and ROI driven investments to attract industry.
US corruption has race to the bottom shopping for tax breaks from local governments. It doesn’t count as extra debt, but it does constrain future revenue.
First, I’m not expert on economics or monetary policy, but I do find the topic interest and read up on it.
Pointing at other countries than US for “debt problems” is somewhat of a joke.
The US absolutely has a debt problem (driven from a deficit spending problem), but the US having a problem doesn’t mean other nations (including China) are perfectly healthy either. The article makes no comparison to the US and appears to be an examination of China in isolation.
France has lower interest rates than US
Barely. France’s 10 year bond right now at 4.8360% is only 34 basis points lower than the US 10 year T-note. UK Gilts and Austrilian sovereign debt yields also exceed the historically high US rates.
The world is going through a liquidity crisis right now and sovereign nations are competing with large corporate borrowers worldwide offering ever more attractive rates forcing governments to compete for the ever shrinking pools of unallocated capital.
China is extremely economically healthy. Not only are long term rates below 2%,
China has massive monetary export controls on its citizens. It has a captive market for domestic liquidity by force of law. It doesn’t need to have favorable rates to attract external foreign investment.
Their debt is 90% owned by banks that government has 70% ownership in.
That…many not be a good thing. When the US Federal Reserve buys dollars to drive down rates, markets start freaking out as it drives down the value of the currency, also know as “printing money” or “Quantitative Easing” in polite circles. Currently the US Federal Reserve only holds 12% of US Debt and the threat of them buying up more sends shockwaves around the world.
Also, China also doesn’t use domestic interest rates to control inflation like many western economies instead using its control of banks to direct spending to create disinflation or deflation.
they have 5% real growth.
Not according to the article you’re replying to:
“In the second quarter of 2026, the country’s economic growth slowed to 4.3%, below the target range of 4.5-5%.”
and their debt is on infrastructure and ROI driven investments to attract industry.
And a number of notable projects aren’t returning that investment. I’m not saying China is taking the wrong path here, as I believe in infrastructure spending, but only where it makes sense. To my amateur eye it looks like they’re taking big swings, hitting some, but also notably missing quite a few as well.
China still is very dependent on revenue derived from exports. While they’ve made significant progress in increasing domestic consumption, it lags far behind other economies of their size. Worse, a good chunk of that domestic consumption is in real estate which is the primary investment vehicle for retail investors. Speculative real estate has been collapsing leaving regular Chinese citizens with real financial losses when this occurs.
None of this is to say “US = GOOD, CHINA = BAD”. No nation on Earth yet has been able to sustain massive economies like these over the long term. I appreciate China is trying something different on many fronts, and am looking closing at them for things we can learn, but that doesn’t mean they’re doing everything right either.
China has massive monetary export controls on its citizens. It has a captive market for domestic liquidity
The USD has significant global advantage because of its historical openness. Wealth prefers USD storage if only because it is the most liquid, and where everything is financialized. CNY is not as attractive for international giants, because the volume/liquidity available isn’t as high, they don’t facilitate carry trade due to the withdrawal restrictions (actually CNH is their offshore currency with small volume, and incentive for exporters to keep revenue in liquid USD is a form of carry trade). CNY currency has appreciated more than USD since war even with 1.7% 10 year yields. It has massive opportunity for capital through greater CNH supply, and can replace global USD liquidity/supremacy if it wants to. Currency controls is more stable, but bubble frenzy openness is what gives early stage nazi empires the head start for fomo premium.
“In the second quarter of 2026, the country’s economic growth slowed to 4.3%, below the target range of 4.5-5%.”
while US did under 2%, with massive military stimulus. Part of the joke of propagandized deflective criticism is the GOP boasting how the Iran war has destroyed their colonies economy far more than the US economy. But OK, China has missed 5% for the first time in 30 years.
When the US Federal Reserve buys dollars to drive down rates, markets start freaking out as it drives down the value of the currency, also know as “printing money” or “Quantitative Easing” in polite circles. Currently the US Federal Reserve only holds 12% of US Debt and the threat of them buying up more sends shockwaves around the world.
either,
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Bank held CNY debt is not really public debt. OP is BS. Regional debt is easily salvageable/bailout range.
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Some practical market forces apply national strategy through banking sector all the while not making foolish investments. China real estate stagnation is national policy move, but with banks telling government that they were not going to sink money into previous bubble. In US, QE is just a panic move to recover from bubble pops.
Also, China also doesn’t use domestic interest rates to control inflation like many western economies instead using its control of banks to direct spending to create disinflation or deflation.
They do, like every country. Massive influence on money supply and interest rates. That is in addition to board level control of facilitation industrial policy. Far more productive than nazi empire banking fraud maximization, though the nazis have strong banking allies in stealing/extorting foreign wealth, and CIA-Israel quid pro quo is major financial system policymaker.
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