Why China has a giant pile of debt?
China's lending to developing countries is a small portion of its overall debt; the debt crisis in China arises from issues in the real estate sector and borrowing by local governments, leading to a lack of funds for public services.
Most of this debt came from building infrastructure, much of which is unlikely to generate revenues sufficient to pay off the obligations. With China's trend growth rate notably lower now than it was, it leaves a burden over the long haul.
[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).
Many pundits blame governments whenever economies crash, but the real cause of China's slump is the long period of fast growth that piled up vulnerable and unsustainable debts. The higher they fly, the harder they fall.
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.
The United States pays interest on approximately $850 billion in debt held by the People's Republic of China. China, however, is currently in default on its sovereign debt held by American bondholders.
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.
U.S. debt offers the safest haven for Chinese forex reserves, which effectively means that China offers loans to the U.S. so that the U.S. can keep buying the goods China produces.
In total, other territories hold about $7.4 trillion in U.S. debt. Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion. In isolation, this $7.4 trillion amount is a lot, said Scott Morris, a senior fellow at the Center for Global Development.
| Characteristic | National debt in relation to GDP |
|---|---|
| Macao SAR | 0% |
| Brunei Darussalam | 2.06% |
| Kuwait | 3.08% |
| Hong Kong SAR | 4.27% |
Will China overtake US?
Economists are less and less certain that the Chinese economy can overtake the US, despite the promises of the Chinese Communist Party. The tipping point in history is set, the curves are due to cross, and China will outpace the US to become the world's leading economic power once again. But when?
Meanwhile, Chinese stock markets have swooned since late 2023, deepening losses that amount to trillions of dollars over the past several years. A real estate downturn, job losses and other trials of the COVID-19 pandemic have left consumers cautious about spending.
Most of the blame for China's problem comes not from a stock crash but rather from the policies of President Xi Jinping. He has made four crucial contributions to this mess. His first was his decision in 2019-20 to suddenly withdraw Beijing's long-provided support for residential property development.
The value of U.S. Treasury securities held by residents of Russia amounted to 33 million U.S. dollars in June 2023, the lowest over the period under consideration. Furthermore, in March 2020, the figure decreased sharply to 3.85 billion U.S. dollars, down from 12.6 billion U.S. dollars one month prior.
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- Japan. Japan has the highest percentage of national debt in the world at 259.43% of its annual GDP. ...
- United States. ...
- China. ...
- Russia.
As a result, totals from January 2023 are lower than reported. 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).
China owns 384,000 acres of American agricultural land. That's a 30% increase just since 2019. And on top of that, they own land near an air force base in North Dakota.
As a result, if the United States and other countries were to stop trading with China, it would disrupt global supply chains and cause economic disruptions in many countries.
While Chinese ownership of U.S. land has been a hot topic among lawmakers — even becoming the center of a Montana Senate race this year — China only had a stake in 383,935 acres of U.S. land as of 2021, which is less than 1% of all foreign-held land.
How much debt is Russia in?
In the latest reports, Russia National Government Debt reached 285.4 USD bn in Dec 2023. The country's Nominal GDP reached 494.7 USD bn in Mar 2023.
China owes the United States $1.3 trillion, which is the most debt out of all the countries that are its debtors. Japan was the primary debt holder until 2008, but now comes in second place, with $1.2 trillion. Other countries with outstanding U.S. debt include Russia, India and South Korea.
One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.
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.
Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation).
