Workers construct a speed skating rink for the 2022 Winter Olympics in Beijing. China has increased infrastructure work this year under a stimulus program. © Reuters

China’s debt mountain scales new heights on trade war stimulus

Cities and banks urged to push infrastructure, sending liabilities soaring again. These projects generate job stability in the short run, but China’s long-term debt risks worsening, which threatens to bring the world’s second-largest economy to a standstill.

BEIJING, Jun 19, 2019  — China’s total public and private debt has reached new highs compared with the size of its economy, raising fears that Beijing’s stimulus push will expand it even further.

The ratio of debt to gross domestic product, excluding the financial industry, totaled 248.8% at the end of March, according to a study by two government think tanks. That figure is 5.1 percentage points higher than it was at the end of December.

Beijing embarked on several profitable infrastructure projects after the 2008 global financial crisis, but most of these are concluded. Most of the remaining projects have questionable earning potential, and many are funded entirely by debt.

These projects generate job stability in the short run, but China’s long-term debt risks worsening, which threatens to bring the world’s second-largest economy to a standstill.

Sources:

https://asia.nikkei.com/Economy/China-s-debt-mountain-scales-new-heights-on-trade-war-stimulus?

 

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