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China's Government Debt: How Off Balance Sheet Liabilities Drastically Change the Picture
Dace, William
Dace, William
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2014
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2014-05-01
Abstract
This paper focuses on China's response to the 2008-2009 financial crises, and how its overall level of debt rose through off-balance sheet funding. The paper attempts to paint a more accurate level of Chinese debt through postulating the amount of off-balance sheet liabilities from local Chinese governments and adding it to the central government's debt level. I obtained estimates of local government debts (which are not reported by the central government) through academic journals, periodicals, and economic websites to unveil China's debt levels are underreported. From there, I conducted a case study to compare China's debt to GDP against countries that have previously defaulted on their debt and countries that currently pose a high risk of default to see if China is in trouble with regard to its debt. While China is not currently in danger of a sovereign debt crisis, if the current growth rate of China's debt continues, there could be problems in the near future.
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Finance