Chinese debt Qilai Shen/Getty Images

Should China Deleverage?

China’s mounting debt problem recently moved into the spotlight when Moody’s downgraded the country’s sovereign rating. But China is confronting a more important macroeconomic challenge than curbing the accumulation of government and corporate debt.

BEIJING – China’s mounting debt problem recently moved into the spotlight when Moody’s downgraded the country’s sovereign rating. But was the downgrade really warranted?

corporate debt to gdp china us

Though China’s overall debt-to-GDP ratio is not an outlier among emerging-market economies, and its levels of household and government debt are moderate, its corporate debt-to-GDP ratio, at 170%, is the highest in the world, twice as large as that of the United States. China’s corporate leverage (debt-to-equity) ratio is also very high, and rising.

To continue reading, please log in or enter your email address.

To read this article from our archive, please log in or register now. After entering your email, you'll have access to two free articles every month. For unlimited access to Project Syndicate, subscribe now.

required

By proceeding, you are agreeing to our Terms and Conditions.

Log in

http://prosyn.org/3eG0hAq;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.