Opinion | The Great Chinese 'Miracle' Is Quickly Turning Into A Debt Nightmare |
May 26, 2026 17:00 pm IST
Opinion | The Great Chinese 'Miracle' Is Quickly Turning Into A Debt Nightmare
According to some reports, China's total debt-to-GDP ratio has topped a whopping 300%
Naresh Kaushik Naresh Kaushik Columnist
Naresh Kaushik Columnist
China will overtake the US to become the world's largest economy by 2028, a British think tank predicted in December 2020, after the first Covid wave. The Centre for Economics and Business Research said China's "skilful" management of the pandemic would boost its relative growth compared with the US and Europe in the coming years. Five years later, the think tank said China is unlikely to overtake the US economy for another 15 years. Other analysts doubt that Beijing will ever achieve that, given the structural problems and roadblocks facing its economy.
The latest economic data released in Beijing last week confirms that the world's second-largest economy has lost momentum. Industrial production rose by just 4.1% year-on-year in April, the weakest since mid-2023. Retail sales grew by just 0.2%, the worst since the country's economy reopened after the pandemic in December 2022. Fixed asset investment contracted by 1.6% in the first four months of this year, driven by a 13.7% year on year decline in property development. Property investment in China has nearly halved since its pandemic-era peak in 2021.
The real estate bubble burst soon after the pandemic ended, depleting the savings of millions of ordinary Chinese. This has severely hit demand for consumer products, as people are stuck with loans on flats they can't sell. After buying a house, owning a car used to be another major investment for Chinese people, but most can't afford one now. Earlier in May, China's car makers reported a 25.5% year-on-year decline in passenger car sales, marking the sixth consecutive month of year-on-year declines. China's electric car giant, BYD, has built up a large stock of unsold cars. Its profits in the first quarter of this year were down 55%, to a three-year low.
China has........