Debt crises are looming in many developing and emerging countries, including on the African continent. But contrary to frequent claims, China's loans are not the main cause. Experts believe that Western creditors also play a key role.
By Redaktion Table
Is China luring other emerging markets into a "debt trap"? China's particular form of foreign aid invites misunderstanding. A thorough analysis of openly available data by researchers provides a much more nuanced picture.
By Redaktion Table
The ongoing power shortage and the crisis surrounding real estate developer Evergrande are currently dominating headlines. Even if some assessments turn out wrong, long-term problems still loom. China's policymakers must act now, says Yu Yongding, who for years headed the Institute of World Economy and Politics at the Chinese Academy of Social Sciences in Beijing.
By Redaktion Table
Everyone's suspicions are now being confirmed: Evergrande can't service its loans. The real estate group is missing one payment deadline after another. But the International Monetary Fund still believes China can cope with the situation without major consequences for the entire economy. Meanwhile, Evergrande's car division made a surprise announcement.
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China's national debt, the Evergrande crisis, and China’s global debt diplomacy: Read all the important and latest news from China.Table editorial team.
China's national debt is estimated to rise to 14 trillion US Dollars in 2022. This number approximately amounts to 78 percent of China’s gross domestic product (GDP). Large parts of China’s national debt can be attributed to supporting non-profitable state-owned enterprises.
Furthermore, in 2020, following the coronavirus pandemic, China’s debt-to-GDP ratio rose to 270%. However, in 2021, the trend was reversed due to higher consumption and exports. Nevertheless, there is a lot of speculation on the sustainability of China’s model and whether or when the bubble would burst. A collapse could lead to a global financial crisis.
China's economic growth is built upon debt. Local governments are piling up deficits to boost the economic development of provinces. However, China’s central government announced in its 14th Five-Year Plan that it would stabilize financial markets and prevent further accumulation of deficit.
China’s Evergrande debt crisis starting in 2020 demonstrates the issues concerning China’s strategy. After new regulations on limits for Evergrande and other companies in China’s property sector were put into effect, Evergrande started facing immense difficulties. The real estate market is regarded as a core problem of the Chinese economy.
Yet, despite China’s high national debt, experts believe that the Chinese government has sufficient instruments at its disposal to cushion a collapse of its economy resulting from a possible financial crisis. Climate change, on the other hand, is seen as a far greater threat to China's prosperity.
Recently, accusations against China’s foreign debt diplomacy in African and Asian countries have arisen. China is the most important lender to many African countries. Countries use the money for infrastructure development. However, China uses this diplomacy to promote its values and narratives. Economic aid is often followed by political and economic dependencies. China’s debt diplomacy has risen the question as to whether it should be considered a trap for countries relying on China’s lending.
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