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China’s public debt could stymie Asian economies while US’s debt could ‘tear apart’ society: analysts
- China’s significant jump in share of total global debt stock to 20 per cent draws scrutiny as its regional governments confront financial strain
- Meanwhile, US’s debt burden at risk of increasing as global investors doubt country’s ability to rein in deficit spending
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Robert Delaneyin Washington
China’s public debt burden threatens to undermine the economic growth of its neighbours while US public debt may “tear apart” society and derail support for its green energy transition, according to analysts speaking at an International Monetary Fund event on Wednesday.
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While the two countries figured prominently in the discussion, China drew scrutiny for a significant jump in its share of the total global debt stock, to 20 per cent from 5 per cent, since 2008, according to IMF data. US debt, in contrast, has remained stable in the same time frame, at 29 per cent.
China’s debt-to-GDP ratio surged by 12 percentage points last year, to 282 per cent, said Joyce Chang, chair of global research at JP Morgan’s corporate and investment bank, led by an uptick in government debt and local government financing vehicles in particular.
That was “well above” the developed market average of 256 per cent, and the “high interest repayment burden is going to crowd out” the ability of local governments to raise more, she said.
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Regional governments in China have faced financial strain as they sought to mitigate the impact of the coronavirus pandemic. A domestic property slump has exacerbated matters by cutting off much of the revenue the governments would get from real estate developers leasing land.
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