China’s debt is likely to soar this year as the country is spending money to revive a weakening economy.

Zhang Xiaojing is the director of China’s National Institution for Finance and Development (NIFD), a government-backed think tank. He advises the People’s Bank of China, the central bank, and other government agencies.

In an interview with Bloomberg, he said that the ratio of China’s total debt to GDP (gross domestic product) this year might increase by 11.3 percentage points to about 275%, the highest on record.

The surge reflects the efforts of China’s central bank trying to boost credit in a bid to bolster a slowing economy.

Zhang claimed that the increase in the debt ratio would be temporary and would not bring too much risk to the world’s second-largest economy.

He said: “The central bank’s stance is that the balance sheet still has to expand, and the economy needs to leverage up.”

China has been trying to pull down its debt ratio since 2017 after the ratio surged along with rising financial risks due to the previous massive stimulus measures. 

However, the country suspended that operation in 2020 and strengthened its stimulus in response to the Covid pandemic. According to Zhang Xiaojing’s institution, China’s debt-to-GDP ratio rocketed by 23.6 percentage points that year.

With the return of the Covid pandemic this year, China has imposed draconian measures under its zero-Covid strategy, which hit the economy heavily. The country has again launched more stimulus measures to boost economic growth. 

Economists predict it will be difficult for the Chinese government to reach the growth target of 5.5% this year.

Chinese President Xi Jinping has recently emphasized the need to protect the economic growth target. Still, an official of the central bank publicly admitted that it is difficult for the country to ensure the goal.

However, during a speech to a BRICS Business Forum on June 22, Chinese leader Xi Jinping stressed that Beijing would further adjust macro policies and adopt more measures to meet social and economic development.

Sign up to receive our latest news!

By submitting this form, I agree to the terms.