FX.co ★ China takes lead in public debt league

More and more countries across the globe are getting involved in the fierce social competition under the slogan of “Catch up and overtake America”. This famous ideological proclamation that emerged in the Soviet Union and was held up across the 20th century as a nationwide motto has been taken up by the People’s Republic of China. The world’s second-largest economy is struggling to outdo the American superpower in every respect, seeking to equate domestic fundamentals with those of its US counterpart. While for some reason the country tends to ignore things like freedom of speech and social welfare, the financial sphere is a whole different battlefield for the Asian giant. The never-ending economic rivalry between China and the United States has recently entered a new phase.

Chinese authorities now have a new reason to be proud as China finally managed to overtake the US in terms of public debt. As dubious an achievement as that might be, what counts most for the Chinese politicos is not the actual competition category – that is debt burden - but holding something that is “the biggest”. So there we are: plastered across the headlines of the Chinese media outlets is the news that the country is saddled with a heavy domestic and foreign debt load, comparable to the levels of the United States and the euro area as the number came to a record 237% of China’s GDP. At the same time, the Bank for International Settlements reported that China’s government debt that totaled 249% of GDP by last October had already exceeded that of the US (248%).

However, Goldman Sachs put a cloud over China’s celebration of its victory over the American rival as one of the experts warned that the rapid pace of debt accumulation might pose a serious threat to China, saying the nation is likely to face a financial crisis or prolonged economic meltdown if it continues on the course. Meanwhile, two more champions in the global competition of debtors are Japan and Greece that have a staggering debt load of 379% and 300% of their GDP accordingly. Speaking of Russia, the country stays out of the debt race with one of the lowest government debt figures in the world.