China’s National Debt


China’s central government debt does not pose a systemic risk said an official from the UN’s Department of Economic and Social Affairs.  China’s official data, basically corroborated by CIA estimates, indicates that its public debt stood at more than US$1 trillion dollars at the end of 2010, representing approximately 17% of GDP.  Unlike European countries, China’s debt is mainly held by its citizens and domestic institutions, akin to the situation in Japan.  But, the official added that China’s high savings ratio, the highest in the world and as high as 50% in places, assures the sustainability of central government debt. 
On the other hand, however, the UN economist stressed that public debts of local governments are reaching critical levels, topping a staggering 2.8 trillion RMB by the end of 2009, in some localities, exceeding three times of fiscal revenue.  A Northwestern University political scientist puts the estimate closer to US$1.7 trillion, more than twice the official figure of US$771 billion for 2010. 
Local governments have set up financing vehicles to fund enterprises and infrastructure projects along with guaranteeing up to US$1.9 trillion in credit lines for local firms.  Although these figures cited by the US based scholar are disputed, even official figures indicate the extent of indebtedness at the grassroots.  Central authorities have since come down hard on local lending and banned government loan guarantees.  Chairman Liu Mingkang of the CBRC said the CBRC would keep close tabs on risks brought on by local government financing vehicles over the next 3-5 years. 
The CIA World Factbook’s 2010 ranking of public debt around the world puts Zimbabwe at top with debts of 241.6% of GDP, closely followed by Japan with 225.8%.  The debts of Iceland, Italy, and Singapore all exceed 100%, those of Belgium and Ireland are in the 90%+ bracket, and France, Germany and England are between 76% and 84%.  India is at nearly 60% while in Greater China, Taiwan sits on nearly 40%, Hong Kong 18.2% and mainland China 17.5%.  Among large economies, Russia’s debt remains very low at less than 10%. 
However, the Factbook’s estimate of US debt at nearly 60% discounts huge amounts held by foreign governments.  This creates a misperception especially when the federal budget deficit is approaching the Congressional debt limit of US$14.3 trillion, which is well over 90% of GDP.  By the end of the end of 2011, if Congress doesn’t shut down, that figure will exceed 100%, not counting municipal and state debt.