National debt of China

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The national debt[note 1] (aka the government debt) of the People's Republic of China is the total amount of money owed by the government and all state organizations and government branches of China. As of March 2016, it stands at approximately CN¥ 28 trillion (US$ 4.3 trillion), equivalent to about 41% of GDP.

Size

The International Monetary Fund, the Federal Reserve Bank of St. Louis[1] and other sources, such as the Article IV Consultation Reports,[2][note 2] state that, at the end of 2014, the "general government gross debt"-to-GDP ratio for China was 41.54 percent.[3] With China's 2014 GDP being US$ 10,356.508 trillion,[3][4] this makes the government debt of China approximately US$ 4.3 trillion.

Issues and concerns

By the mid-2010s, many analysts have expressed concern over the overall "size" of the Chinese government debt.[5][6][7] [8] An IMF working paper, published in 2015, states that "financial sector reforms in China are progressing at an uneven pace", adding that "progress in removing implicit state guarantees has been slower."[9] This, according to the IMF paper, means that "with implicit state guarantees still in place, banks have little incentives to seek better projects and correctly price risk."[9]

Other analysts have pointed out the ostensibly "disproportionate" portion of local and provincial debt in the national debt of China,[10] and the alleged, "extensive" practice of shadow banking in China.[11]

Chinese authorities have dismissed analysts' worries, insisting that "the country still has room to increase government debt."[12] Finance Minister Lou Jiwei stated that China's "fiscal income is in a severe situation," yet the government "need[s] to expand the fiscal deficit, but it is hard to say how much room is appropriate."[12]

Former Fed Chairman Ben Bernanke, earlier in 2016, commented that "the...debt pile facing China [is] an 'internal' problem, given the majority of the borrowings was issued in local currency.[13] Many economists have expressed the same views, dismissing worries over the size of Chinese government debt, either in absolute terms or in proportion to the nation's GDP, as "nonsensical".[14]

See also

Notes

  1. ↑ The term "national debt" typically refers to direct liabilities of the Government. There are several different concepts of debt that are at various times used to refer to the national debt: "Public debt" is defined as public debt securities issued by the Government. "Debt held by the public" measures the cumulative amount outstanding that the government has borrowed to finance deficits. See: FAQ, U.S. Department of the Treasury
  2. ↑ An "Article IV consultation" is a "regular, usually annual, comprehensive discussion" between IMF staff and representatives of individual member-countries concerning the member's economic and financial policies, conducted on the basis of Article IV of the IMF Articles of Agreement. See: IMF Glossary

References

  1. ↑ "General government gross debt for China", Federal Reserve Bank of St. Louis
  2. ↑ "People's Republic of China 2015 Article IV Consultation - Press Release; Staff Report; and Statement by the Executive Director for the PRC" IMF Country Report No. 15/234
  3. ↑ 3.0 3.1 World Economic Outlook Database, October 2015, IMF
  4. ↑ China, World Bank
  5. ↑ "The great hole of China", The Economist, 18 October 2014
  6. ↑ "China's Total Debt Load Now Over 280% Of GDP" by Kenneth Rapoza, Forbes, 9 May 2015
  7. ↑ "China's Debt-to-GDP Ratio Just Climbed to a Record High" by Ye Xie, Bloomberg 15 July 2015
  8. ↑ "How will China tackle its debt dilemma?" by Adair Turner, Institute for New Economic Thinking, World Economic Forum website, 3 December 2015
  9. ↑ 9.0 9.1 "Financial Distortions in China: A General Equilibrium Approach" by Diego Anzoategui, Mali Chivakul, and Wojciech Maliszewski, IMF, 2015
  10. ↑ "China's Debt Load To Hit 250% Of GDP In 5 Years, IMF Says", ZeroHedge, 15 August 2015
  11. ↑ "Be Scared of China's Debt, Not Its Stocks" by Noah Smith, Bloomberg, 7 January 2016
  12. ↑ 12.0 12.1 "China's fiscal income to slow but room for more government debt - Finance Minister" by Xiaoyi Shao and Lisa Twaronite, Reuters, 7 March 2016
  13. ↑ "Bernanke downplays China impact on world economy" by Joyce Ho, Nikkei Asian Review, 19 January 2016
  14. ↑ "...Most people think of China’s growth coming from its burgeoning export sector. But it has a very strong domestic economy and a large public spending program – its called ‘nation building’. ... [T]here is no discussion [in China] about the country drowning in debt and all of that nonsense. [The Chinese] know full well that they are sovereign in their own currency and can deficit spend to further their sense of public purpose." : From "The government really is instrumental in creating growth" by Bill Mitchell, 20 January 2016

External links

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