China’s economy grew by leaps and bounds post-2001 after the country steered towards manufacturing products to cater to global demand. The Chinese economy experienced phenomenal growth over the years reaching a GDP of $19.37 trillion in 2023. China is only second to the United States a $26.85 trillion economy and is now looking to overtake the U.S. Nonetheless, while the growth is remarkable, China’s financial rise to power has now come at a cost.
The Chinese national debt is steadily increasing, giving room to concerns about its ability to sustain the growing economy. The national debt of China now amounts to $14.34 trillion and ranks second globally only below the U.S. The United States has the highest national debt globally amounting to $31.68 trillion.
Also Read: BRICS Moving To Kill the U.S. Dollar & Western Dominance? Not So Fast!
In FY 2022-23, the U.S. national debt grew by $1.3 trillion or 4.28%. However, China’s national debt grew three times that of the U.S. in the last 12 months raising concerns of upcoming financial instability.
The national debt of China increased by $3.81 trillion or 36.18% year-on-year (YoY) compared to the $10.53 trillion recorded in FY 2021-22. Therefore, China’s national debt is increasing more sharply than the United States and could move further ahead in FY 2023-24. The chart below illustrated how China and the United States national debt grew rapidly in the last 12 months.
Also Read: BRICS New Currency to be Backed by Gold?
Why is China’s National Debt Growing Faster than the U.S.?
China’s increasing national debt comes from a combination of factors including government spending on development projects and slowing economic growth. President Xi Jinping’s administration injected billions of dollars worth of credit into government-owned enterprises as a response to the global financial crisis.
Subsequently, the Covid-19-induced lockdowns added an extra burden on the Chinese economy forcing financial establishments to make it easier for companies to secure loans and stay afloat.
Also Read: Will the U.S. dollar Collapse Now That BRICS Are Developing Their Own Currency?
The overall combination made China’s debt increase relatively equal to its entire GDP. The growing trend is expected to continue and its growth and rise to power have come at a price.