China’s Debt Reaches 250% of GDP

Chinese Debt


William R Collier Jr. – For the past five years, we have been writing about China as a paper tiger with inflated numbers, and now analysis has revealed that China’s much-vaunted “economic miracle” is nothing more than the result of debt spending on a massive scale.

Stephen Green at Standard Chartered has calculated that China’s actual debt is now 250% of its Gross Domestic Product (GDP). But in 2009, China’s debt was only around 70% of its GDP, making this meteoric rise alarming. This debt includes both public and private debt.  However, in China, the government controls much of the corporate world and financial institutions.

With a reported GDP of $9.6 trillion, China’s total debt should equal around $24 trillion. The US, by comparison, has a GDP of around $16.24 trillion, with a total debt burden of $42.2 trillion. Total public debt stands at $17.1 trillion.

While total government debt may be 53% of GDP, a major portion of the corporate and financial sector debt is directly driven by the government which operate a communist “management” policy that, at best, mixes free market policies with their overall Party agenda.

In the United States, government and private debt equal 260% of the GDP, with federal government debt right at 105% of GDP and private debt at 155% of GDP, but much of this private debt is independent of government obligation.

US Debt has also risen. At the end of 2008, just before President Obama was sworn into office, US public debt stood at around $10 trillion with a GDP at around $14.5 trillion. At the end of 2013, US public debt stood at $16.7 trillion compared to a GDP of $16.9 trillion. It is projected that 2014’s GDP will stay at around $16.9 trillion, while public debt has gone over $17.6 trillion. Household debt in the US, money owed by individuals, it at $13 trillion, near where it was in 2007, and has shrunk since the end of 2008 both as a percentage of total debt and in terms of raw amounts.

But while the total US debt has risen around 40% since 2009, an alarming number to be sure for some, Chinese debt has risen from a little under 80% of GDP to 251% of GDP, and that’s just the debt we know about. The Chinese are known for manipulating numbers in their favor, which usually means that if the numbers look bad, they are probably worse.

It would appear then that much of China’s “success” and even “growth” has been driven by a massive spending program, funneled through “private” but government controlled institutions to prop up what remains an essentially communist, and, therefore, unsustainable economy.