China debt: how big is it, who owns it and what is next?

China debt: how big is it, who owns it and what is next?

  • The Institute of International Finance (IFF) estimated that China’s total debt hit 317 percent of gross domestic product (GDP) in the first quarter of 2020
  • In May 2020, the IFF also said the debt owed to China by the rest of the world had risen to more than 6 per cent of global GDP

What is the nature of China’s debt? 

Broadly speaking, China’s debt can be divided into domestic debt and foreign debt.

China’s domestic debt, denominated in yuan, consists of three components: corporate, household and government debt. Corporate debt includes borrowings by private sector and state-owned companies, while China’s public debt is a combination of national and local government debt. Household debt, meanwhile, is the combined debt of all people in a household, including consumer debt and mortgage loans.

China’s foreign debt in currencies other than the yuan includes private sector firms’ borrowing from foreign banks, trade-related credit to Chinese firms from foreign trading partners and debt securities issued by Chinese state-owned and private sector firms to foreign investors.