China’s debt interest costs are soaring above U.S. levels and growing faster than any other budget category as Beijing struggles to prop up growth
In fact, China's debt has shot up so much in recent years that interest payments on all its borrowing are commanding a bigger share of public spending.
Debt-servicing payments will account for 19.2% of the central government's general public budget this year, up from 12% in 2014, according to new Conference Board estimates cited by the Financial Times.
That tracks with a separate report earlier this year from the Center for Strategic and International Studies, which also found that 19% of Beijing's spending is earmarked for interest on debt. That's more than the 14% of the U.S. federal budget that goes to interest costs, though less than Japan's 25.6%.
The U.S. economy is accelerating, helped by the AI boom, and despite high inflation, resilient consumers have continued to spend. Unemployment is low and signals full employment, while stock markets are at or near record highs.
Meanwhile, China's GDP has been decelerating and is on pace to undercut its annual target of 4.5%-5%. And while export-facing sectors are growing at a fast clip, trade partners are putting up barriers, Chinese consumers remain reluctant to spend, investment is weak, the property sector is still digging out from an epic crash, and Chinese stocks have been anemic.
Beijing has also steered state banks to provide financing to priority industries like electric vehicles, robotics, artificial intelligence and renewable energy.
But under pressure to lend, many loans went to questionable borrowers. Business debt has doubled since 2019, while revenues are only 30% higher. Creditors continue to roll over loans to keep struggling firms afloat, even as nearly a third of them are losing money.
By
krom ·
