Financial Risks
Shadow banking, local government debt, and the fragilities lurking beneath China's financial system.
The Debt Mountain
China's total debt — government, corporate, and household — has risen from approximately 140% of GDP in 2008 to over 300% by 2024, one of the fastest debt buildups in history. Corporate debt alone exceeds 150% of GDP, among the highest in the world. The expansion was driven by the massive stimulus after the 2008 global financial crisis, when China pumped 4 trillion yuan ($586 billion) into infrastructure and construction to maintain growth while Western economies contracted.
The 2008 stimulus worked in the short term — China maintained near-10% growth when the rest of the world was in recession — but it created a debt addiction. Each subsequent unit of growth required more and more debt to produce. The 'credit intensity' of Chinese growth roughly tripled between 2008 and 2020, meaning the economy was generating ever less output per unit of borrowing.