China’s debt burden has crossed a new line. The country’s total debt-to-GDP ratio, excluding the financial sector, has topped 300%, more than doubling since 2010 as borrowing by companies and by central and local governments has kept racing ahead of economic growth.
That scale puts China ahead of the United States, the eurozone, the U.K. and other emerging markets, with only Japan carrying more debt aside from a few smaller economies. Nearly 40% of outstanding debt is now owed by the public sector, including local government financing vehicles, underscoring how much of the load sits with the state as the economy slows.
Mark Williams said in a note cited late last month that China’s current level of indebtedness puts it in a league of its own. The latest figures back that up: China’s debt-to-GDP ratio has risen by more than 120% of GDP over the past 15 years, and the pace of borrowing has not eased enough to bring the total back under control.
Chinese authorities moved over the weekend to confront the problem, vowing to ramp up efforts to ease local government debt risk with a restructuring program and calling for a crackdown on new hidden borrowing. The pledge comes as President Donald Trump is set to meet Chinese counterpart Xi Jinping this week, putting the issue of growth, debt and policy pressure near the center of the moment.
The strain is broader than the public balance sheet. Business debt in China has doubled since 2019 even though business revenues are only 30% higher than they were then, and nearly one-third of Chinese companies are losing money. Weaker household borrowing has not been enough to offset that drag, while China has been suffering from deflation for three straight years as local governments keep pushing low-cost loans into favored industries such as AI, electric vehicles and robotics.
That leaves Beijing with a narrowing path: the central government has tried to combat overproduction and excess competition, but the debt problem is still being fed by the same state-led model it is trying to slow. The headline number is now above 300%, and unless borrowing cools, the cost of preserving growth will keep rising faster than growth itself.
