China faces $4 trillion ‘ticking debt bomb’ amid financial crisis surrounding Evergrande

China facing a 'ticking time bomb' with debts says expert

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China is facing a “dangerous debt bubble” amid the ongoing crisis at the Chinese property giant Evergrande, according to the Indian-based news channel WION. China is said to have racked up $4 trillion worth of debt with WION reporting that the true number may be much higher amid attempts by Xi Jinping’s officials to hide the amount of borrowing needed to fuel China’s massive housing and infrastructure boom.

WION presenter Palki Sharma said: “There is a dangerous debt bubble in China, it is a ticking time bomb that Chinese officials have tried to hide.

“China’s overall debt now stands at well over 270 percent of its GDP, you heard that right, let me repeat the figure 270 percent of China’s GDP that’s debt.

“China’s outstanding foreign debt reach $2.4 trillion in 2020.

“Those are the numbers that we know about what’s making the crisis worse is the hidden debt, the numbers that we don’t know about like the borrowings by local governments no transparency there.

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She continued: “Here’s something you should know, the state is the biggest borrower in China local governments depend on off the books borrowing, meaning those numbers are not on the books they’re hidden.

“In 2018 Standard and Poor’s came out with a report estimated that hidden government debt could be well over $4 trillion.

“And this $4 trillion bomb now looks set to explode.

“China tried to clean the house quietly but the defaults, have brought the truth.”

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The presenter concluded: “China’s struggling to put the debt genie back in the bottle.”

China property behemoth Evergrande Group Dwindling has seen $305 billion of liabilities wipe 80% off the firm’s value this year.

The property firm still has further debts to be serviced.

Economists are worried an implosion of the super-sized builder may be impossible to stop, tipping a crisis in the world’s second-largest economy into a full-blown financial disaster.

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For now, Evergrande’s decision to honour an outstanding $83.5 million bond coupon has staved off total insolvency. 

There is a positive out of this, they have not defaulted,” said Himanshu Porwal, corporate credit analyst at Seaport Global in London.

“But they are not out of the woods.

“There is a huge ticking time bomb of $37 billion of short-term debt.”


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