Despite concerns over a high debt-to-GDP ratio, a senior researcher from the China Forum 40 (CF40) think tank has reassured that China's debt remains manageable. By the end of 2023, China's total debt reached 363 trillion yuan ($50.42 trillion), amounting to 288 percent of its GDP.
Zhang Bin, the 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 that the sheer volume of debt does not necessarily indicate an over-accumulation. He highlighted that over the past decade, China has maintained minimal inflationary pressures, with annual consumer price index (CPI) growth consistently below 2 percent, and the renminbi appreciating by 15 percent against a basket of currencies.
These trends, according to Zhang, reflect balanced financial asset growth and stable purchasing power. When compared globally, China's financial assets relative to its GDP are modest, standing at 3.6 compared to the United States' 13.4 and Japan's 15.7. This suggests that China's financial asset volume is not extraordinary.
Zhang also pointed out that traditional debt leverage ratios may not be the best metrics for assessing debt risk. Instead, he advocated for a debt growth rate that aligns with the core inflation target of 2 percent. To reduce leverage and debt burden, maintaining low-interest rates and modest inflation is crucial.
Furthermore, Zhang noted that government debt plays a significant role in the overall debt structure. Government borrowing acts countercyclically, stabilizing demand by offsetting fluctuations in private sector spending.
Reference(s):
China's debt not excessive despite high leverage, CF40 expert says
cgtn.com
