FX.co ★ China’s government debt tops 100 trillion yuan for first time

China’s aggregate government debt has hit a record high and for the first time exceeded the psychological threshold of 100 trillion yuan (about $14.77 trillion). RIA Novosti, citing Chinese financial media, reports that the record logged at the end of May reflects the total volume of outstanding government bonds in the People’s Republic of China. Over the past twelve months, this metric rose by 15%.

Such a large and rapid increase in borrowing is driven by Beijing’s aggressive fiscal policy, aimed at stimulating the national economy and overcoming internal structural constraints.

Officials at China’s Ministry of Finance moved quickly to reassure markets, repeatedly stressing that the current debt burden of the world’s second-largest economy remains within reasonable bounds and that associated financial risks are fully under state control. Independent economists, however, offer a more balanced assessment. Investment banker Evgeny Kogan noted that China’s real government debt relative to GDP is already comparable to similar measures for the United States. He attributed this to a colossal volume of so-called hidden debt that is not captured in official statistics from the Ministry of Finance.

The reference is to a specific financing mechanism under which Chinese regions issued quasi-governmental municipal bonds through specialized commercial entities. Funds raised were directed to large infrastructure projects, and accumulated obligations were later serviced through revenues from the sale of state land for commercial development. The prolonged crisis in China’s property market has effectively paralyzed this scheme: developers cut purchases, local government revenues fell, and provincial authorities were left with massive debts they can no longer service on their own.