- China’s government debt reached $18.7T in 2025, surpassing the EU for the first time.
- U.S. debt climbed to $38.3T, remaining the world’s largest by a wide margin.
- Since 2008, China’s debt has grown more than twice as fast as the U.S. and far faster than Europe.
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While the EU’s slower debt growth partially reflects weaker nominal growth across the bloc compared to the U.S. and China, it also is a symptom of the bloc’s tighter fiscal constraints after Europe’s sovereign debt crisis, which peaked between 2010 and 2012.
In contrast, China’s surge in debt was driven by credit expansion, infrastructure spending, and state-backed growth.
The U.S., meanwhile, combined crisis-era borrowing with persistent deficits, especially after 2020, allowing debt to scale far beyond Europe’s. With fewer fiscal constraints at the federal level, Washington has maintained higher spending levels.
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All of that is irrelevant in the short term.
Every other place they could put their money is far worse.
The yen and the Euro are both going to be absolutely hammered by the energy crisis (because they are massive net importers of petroleum). They are literally going to have no choice but to sell their reserves of treasuries to prop up their own currency (meaning that will weigh on forex of the dollar and push up yields of treasuries)
Also, you're doing the math backwards. If there's deflation that gets added to the interest rate, not subtracted, when calculating the true yield of a bond.
So is China, it imports more oil than any other country by a fair margin and as far as I can tell a bit more than the EU27 collectively do as well
Three big differences:
China has easy access to Russia, but it was also a major buyer of Iranian and Venezuelan oil. Can the Russian pipelines scale up to cover that at short notice?
Estimates for China's strategic reserve seem to be 1.3 billion barrels, which is about three or four months of imports. That's not very different to the EU requiring members to have 90 days in reserve
To be clear, I do not think that China is about to collapse over this or anything like that. It's a functioning country with a generally competent government. I just think that the (implied) assessment of China being functionally isolated from the pressures you describe Japan and the EU facing is wrong
Deflation is negative inflation. My math above is correct.