China’s “Great Wall” of Debt Chinese Debts and their Macroeconomic Implications. Bertelsmann Stiftung GED Focus Paper

Kern, Andreas (2018) China’s “Great Wall” of Debt Chinese Debts and their Macroeconomic Implications. Bertelsmann Stiftung GED Focus Paper. [Policy Paper]

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Abstract

The figures of the Chinese debts are subject to ongoing discussion among economists. The question whether the enormous rise in Chinese corporate and private debt over the past decade will lead to another global financial crisis or will be managed by the Chinese government is one of vital importance to the global economy: if China’s debt management fails, the macroeconomic effects are expected to overshadow the catastrophic effects of the 2008 financial and economic crises by large. The Economist (7 May 2016) even goes as far as to state the question not if, but when China’s debt bubble will burst. The term “China’s Great Wall of Debt” coined by Dinny McMahon (2018) to emphasize the connection between recent Chinese growth and corresponding debt seems therefore very well put.

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