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China’s Debt Surpasses Europe for the First Time (www.visualcapitalist.com)

submitted 4 days ago by Sepia@mander.xyz to c/china@sopuli.xyz

6 comments fedilink hide all child comments

cross-posted from: https://mander.xyz/post/49967874

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.

...

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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[–] bunkyprewster@startrek.website 1 points 4 days ago (2 children)

Could Chinese bonds come to replace us Treasury bonds globally?

[–] jacksilver@lemmy.world 2 points 4 days ago

There are two things that I see will define the next few decades:

What happens after 2026 midterms (or after Trump presidency in America)?
How does Xi transfer power?
- This is probably the biggest one. If Xi can transfer power gracefully then it removes a lot of the concerns of long term stability in China.

[–] Transform2942@lemmy.ml 0 points 3 days ago (1 children)

It's already happening. Unprecedented capital flight from US to Hong Kong by the Gulf States is happening as we speak

[–] Sepia@mander.xyz -1 points 3 days ago (1 children)

These capital transfers of Asian wealthy investors have nothing to do with Chinese bonds but rather with the UAE being not seen as a safe haven anymore. And the transfers by far don't go only to Hong Kong but also Singapore and even Switzerland.

What the bond market holds for China is everything but certain. The Chinese economy has been struggling with strong deflationary pressure in the 3 years, and we see long-term bond yields now at their lowest level on record (below 1% at the start of this year, down from 1.5% mud-2025). In a first, China's 30-year government bobd yields fell below the Japanese Government Bobd.

The question is what this reveals about investor sentiment and the state of China's economy. Sovereign debt is supposed to be a 'safe bet' (states can't go bankrupt, so the default rate is zero). In simple terms, bond yield = expected GDP growth + expected inflation. If the sum of these two variables equals less than 1%, it's not a good message for China's economy in the long run.

[–] Transform2942@lemmy.ml 1 points 2 days ago* (last edited 2 days ago) (1 children)

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.

[–] Sepia@mander.xyz 1 points 2 days ago

Deflation is negative inflation. My math above is correct.