The national debt[note 1] (or government debt) of the People's Republic of China is the total amount of money owed by the central government, local governments, government branches and state organizations of China. Standard & Poor's Global Ratings has stated Chinese local governments may have an additional CN¥ 40 trillion ($5.8 trillion) in off-balance sheet debt.[1] Debt owed by state-owned industrial firms is another 74% of GDP according to the International Monetary Fund.[2] The three government-owned banks (China Development Bank, Agricultural Development Bank of China and Exim Bank of China) owe a further 29% of GDP.[3] China's debt level increased during the 2010s,[4][5][6] continuing as an economic issue into the 2020s.[7][8]
The International Monetary Fund, the Federal Reserve Bank of St. Louis[9] and other sources, such as the Article IV Consultation Reports,[10][note 2] state that, at the end of 2014, the "general government gross debt"-to-GDP ratio for China was 41.54 percent.[11] With China's 2014 GDP being US$ 10,356.508 billion,[11][12] this makes the government debt of China approximately US$ 4.3 trillion.
The foreign debt of China, by June 2015, stood at around US$ 1.68 trillion, according to data from the country's State Administration of Foreign Exchange as quoted by the State Council.[13] The figure excludes the Special Administrative Regions of Hong Kong and Macau.[13] Chinese foreign debt denominated in the U.S. dollar was 80 percent of the total, euros 6 percent, and Japanese yen 4 percent.[13]
In 2023, aggregate local government debt had risen to 92 trillion yuan ($12.58 trillion) and the central government of People's Republic of China ordered its banks to roll over debts in a debt-restructuring.[14] China’s gross external debt in 2023 was $2.38 trillion.[15]
By the mid-2010s, many analysts had expressed concern over the overall "size" of the Chinese government debt.[16][17][18] [19] 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."[20] 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."[20]
A 2015 International Monetary Fund report concluded that China's public debt is relatively low "and on a stable path in all standard stress tests except for the scenario with contingent liability shocks," such as "a large-scale bank recapitalization or financial system bailout to deal, for example, with a potential rise in NPLs from deleveraging."[21]
"Shadow banking" has risen in China, posing risks to the financial system.[22][23]
Chinese authorities have dismissed analysts' worries, insisting that "the country still has room to increase government debt."[24] 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."[24]
Former Federal Reserve System 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."[25] 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".[26] Amidst the China-U.S. trade war,[27] economists underline persistent that issues in China's economic structure may further curtail growth,[28][8] and have led to new benchmarks of high debt-to GDP ratios in 2020 and in 2022.[7]
By 2015, local government entities owed a total of about 18 trillion yuan (about one-third of China's economy), mostly to state-owned banks who had made loans to the local governments "to fund risky land and property deals."[29] The Chinese central government authorized provinces to issue at least 2.6 trillion yuan ($419 billion) in bonds in 2015 in order to stabilize the financial system.[29] However, demand for provincial bonds from the private market was weak due to inadequate yields, and in May 2015, the central government directed state-owned lenders to buy the local bonds, creating a debt swap akin to a bailout.[29]
In 2022, China's 31 provincial governments had a stockpile of outstanding bonds that's close to the Ministry of Finance's risk threshold of 120% of income and face a maturity wall over the next five years as bonds worth almost 15 trillion yuan ($2.1 trillion) - more than 40% of their outstanding debt - fall due.[30]
By 2023, national debt owed by local governments totaled 92 trillion yuan or 76% of People's Republic of China's reported economic output in 2022.[14]