According to the State Administration of Foreign Exchange, China's debt in 2022 will be 650 trillion yuan, while China's GDP will only be 120 trillion yuan.
This means that China's debt-to-GDP ratio is as high as 540%, well above the internationally recognized safety line. So, where does all the Chinese money go? Why borrow so much money? And how do you pay off these debts?
China's debt structure and sources
China's debt is mainly divided into four categories: debt, corporate debt, financial institution debt and resident debt.
Among them, corporate debt accounts for the largest proportion of total debt, about 60%, followed by debt, about 30%, financial institution debt and resident debt each account for about 5%.
There are two main sources of China's debt: domestic borrowing and international borrowing. Domestic lending mainly includes bank loans, credit card loans, bond issuance, private lending, etc.
International lending mainly includes foreign debt, foreign exchange reserves, foreign investment, etc. According to the data, China's domestic debt accounts for more than 90% of its total debt, and its international debt accounts for less than 10% of its total debt.
Causes and consequences of China's debt growth
There are many reasons for China's debt growth, mainly the following:
Driven by economic growth. In order to support economic development, China and enterprises have invested heavily in infrastructure construction, industrial upgrading, scientific and technological innovation and other fields, and these investments often need to be realized by borrowing.
At the same time, China has also adopted active fiscal and monetary policies, increased public spending and credit supply, and stimulated economic recovery and growth.
The need for consumption upgrades. With the development of China's economy and the improvement of people's living standards, the consumption demand and consumption capacity of Chinese residents have also been continuously enhanced.
In order to meet these consumer needs, Chinese residents are also increasingly using credit cards, consumer loans, online loans and other methods to make purchases, resulting in an increase in household debt.
Development of financial markets. In the past few years, China has also accelerated the reform and opening up of financial markets, promoted the diversification and innovation of financial institutions, and improved the efficiency and coverage of financial services.
These financial institutions have provided more lending channels and products for China, enterprises and residents, and have also increased the debt risk of financial institutions themselves.
China's debt growth has also had some consequences, mainly the following:
Diminishing returns on debt. As the scale of debt continues to expand, the economic growth effect of debt is gradually weakening. All of this has led to diminishing returns on debt, and the more debt, the less obvious the economic growth advantage becomes.
Risk accumulation of debt. As the scale of debt continues to expand, so do the risks posed by debt. All of this leads to the risk accumulation of debt, that is, the greater the risk of each additional unit of debt.
The constraining effect of debt. With the continuous expansion of the scale of debt, debt has also exerted a certain restrictive effect on China's economic and social development.
The ways and difficulties of China's debt repayment
There are several main ways to repay China's debt:
Economic growth. Economic growth is the fundamental way to repay debt, and only through economic growth to raise incomes can we be able to pay off debts.
Therefore, China should adhere to the supply-side structural reform as the main line, optimize the economic structure, improve economic efficiency, enhance economic resilience, and achieve stable economic growth and high-quality development.
Fiscal reconciliation. Fiscal adjustment is an important means of debt repayment, through rational arrangement of fiscal revenue and expenditure, balance of fiscal budget, control of fiscal deficit, reduce fiscal leverage, improve fiscal efficiency, and achieve sustainable fiscal development.
Monetary policy. Monetary policy is an effective tool for debt repayment, through reasonable regulation of money supply, maintaining monetary stability, controlling inflation, and reducing debt burden.
Debt restructuring. Debt restructuring is a necessary measure to repay debt, and reduce debt risk and improve debt sustainability by adjusting the structure, term, interest rate, currency, etc. of debt.
Debt relief. Debt relief is the last resort to repay debts, through consultation with creditors, reduce or cancel part of the debt, alleviate the debt crisis, and restore the credit of the debt.
China's debt repayment also faces some difficulties, mainly as follows:
The scale of the debt is enormous. China's debt has exceeded 650 trillion yuan, equivalent to 5.4 times China's GDP and 8% of world GDP.
This means that China will have to pay off these debts at a huge cost and sacrifice, and it will take a long time and process.
The structure of debt is complex. China's debt structure involves multiple entities, multiple levels, multiple fields, multiple channels and multiple products, and there are intricate relationships and influences between them. This means that in order for China to pay off these debts, it needs to coordinate the interests and demands of all parties, and also need to deal with various risks and challenges.
Changes in the environment for debt. China's debt environment is also constantly changing, including the domestic economic situation, social sentiment, policy orientation, as well as international market fluctuations and trade frictions.
This means that in order for China to pay off these debts, it needs to adapt to various changes and uncertainties, and it also needs to maintain its own stability and development.
epilogue
In short, China's debt problem is a complex and urgent issue that requires us to seriously analyze and solve it. China's debt problem did not come into being overnight, nor can it be solved overnight.
The debt issue requires us to look at and deal with it from an overall and long-term perspective, and we cannot blindly pursue speed and quantity, nor can we blindly avoid problems and responsibilities.
Only in this way can we effectively control and reduce China's debt risks, achieve China's debt sustainability, promote China's economic and social development, and contribute to China's national prosperity and people's happiness.