New IMF Report Reveals Just How Big China’s Debt Problem Is

By Annie Wu, Epoch Times
December 18, 2017 Updated: December 18, 2017

A newly released report and book on the Chinese economy has revealed the severity of China’s debt problem.

The International Monetary Fund (IMF) released its once-in-five-years assessment of financial stability around the world on Dec. 6. The report on China detailed the severity of its debt, which—tallied between central and local government, corporate, and household—amounted to 2.55 times GDP (Gross Domestic Product). This is a significant increase from the previous report, which recorded debt at 1.8 times the GDP.

The International Monetary Fund (IMF) building sign, in Washington, DC. on April 5, 2016. (Karen Bleier/AFP/Getty Images)

The World Bank has not yet released its GDP numbers for 2017, but He Weiwen, deputy director at Center for China and Globalization, a think tank based in Beijing, estimated that China’s 2017 GDP could reach about 82 trillion yuan (about $12.3 trillion), according to a report by the Chinese regime’s mouthpiece newspaper, People’s Daily, published on Oct. 28. China’s 2016 GDP was $11.19 trillion, according to the World Bank.

Using the Center for China and Globalization’s GDP estimate for China, and the IMF’s estimate of debt to GDP ratio, China’s national debt would equal to 209 trillion yuan (about $31.6 trillion).

In the report, the IMF pointed out the rate of debt increase was significant for the last six years. Meanwhile, it cautioned against the continued presence of unregulated shadow banking, as well as the Chinese regime’s efforts to support bankrupt zombie firms, contributing to the credit crisis.

American-based Chinese economist Dr. Cheng Xiaonong, who just published a new book on the Chinese economy, said in an interview with Voice of America that the Chinese regime has paid a heavy price to maintain the massive apparatus it has created to surveil and control society. Just keeping public security forces and the army employed is expensive. By Cheng’s estimate, out of China’s 31 provinces and directly governed municipalities, 25 are in debt, surviving by relying on funds from central authorities. Only Shanghai, Beijing and the provinces of Guangdong, Zhejiang, Jiangsu, and Fujian are in the black, with a total surplus of three trillion yuan ($453 billion).

Economist Dr. Cheng Xiaonong. (The Epoch Times)

Cheng also noted that the past two decades of China’s rapid growth was buoyed by one-off events: foreign investment after entering the WTO (World Trade Organization) and its real estate boom. With no future sources of explosive growth, he predicted that China’s economic prosperity will be short-lived and enter a “normal state.”