Clear And Present Danger

The centre's, as well as the states'Liabilities, are riding at an alarming rate.

- Anand Adhikari

For three decades up to the 2008 global financial crisis, China’s gross domestic product (GDP) grew close to double digits. Government debt to GDP remained low at 20-25 per cent. As growth rate slipped to 6-7 per cent after that, government debt started getting out of hand. The debt-to-GDP ratio of the world’s second-largest economy has almost doubled to 55 per cent in the last decade. This has been a result of China’s massive investment push to create more capacity as the export engine slowed after the global meltdown. Many say even the 55 per cent figure is an understatement. In fact, international rating agencies often look at Chinese debt numbers with a pinch of salt due to heavy off-balance-sheet borrowings.