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Douglas Buckland

Comparative National Debt vs GDP

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In many recent threads, the US national debt vs. GDP has been mentioned without any comparison to other nation's debt vs. GDP. I thought that I'd take a look at that and what I found was interesting. The ranking for the top 10 countries with the largest national debt to GDP, as of 2017, are as follows (source identified below):

1. Japan

2. Greece

3. Portugal

4. Italy

5. Bhutan

6. Cyprus

7. Belgium

8. The United States of America

9. Spain

10. Singapore

Most of the comments are, as you would expect in these perilous times, in relation to the USA vs. China. Let's take a look at that.

"Of the world's major economic powers, the United States has the highest national debt at 108.02% of its GDP. China, the world's second-largest economy and home to the world's largest population (1,415,045,928), has a national debt ratio of just 51.21% of its GDP. Germany, as Europe's largest economy, also has a relatively low national debt ratio at 59.81%. Hong Kong, a major global financial center, has the lowest national debt in the world, at just 0.05% of its GDP. This is followed by the tiny Kingdom of Brunei with a population of just 434,076 and a national debt of 2.49% of its GDP"

But notice the comments from another article mentioned below:

"Concerns about China's massive debt pile tend towards hyperbole. Doomsayers see China's debt as unsustainable, which it is. They predict that an economic crisis is near - which it is not. If we look beyond the doom and gloom, there is much to indicate that China is far away from a looming financial crisis.

There are many credible warning signs that China has a debt problem that should be taken seriously. According to the Bank for International Settlements, China’s debt to GDP ratio reached 257 percent in 2017, higher than the United States’ 152 percent, and more than most emerging economies. The IMF anticipates that by 2020 China’s domestic credit to GDP ratio will rise to 300 percent. In May, for the first time since 1998, Moody’s Investors Service downgraded China’s sovereign credit rating. The speed and composition of China’s debt build-up are certainly cause for alarm. China’s annual credit growth averaged 20 percent between 2009 and 2015, while over the same period the non-financial credit to GDP ratio increased from 150 to 200 percent. The property sector and related industries accounted for half of the new debt while murky shadow banking contributed to 30 percent. Two-thirds of corporate debt is owed by Chinese SOEs, with SOE debt standing at 115 percent of GDP. With most SOEs indirectly involved in the construction industry, turbulence in the residential real estate market will hit commercial banks on all sides.

As I have said repeatedly on this site, I am not a 'financial guy'. From a layman's viewpoint (mine) it seems that China is in as much of a bind, if not more, than the USA.

Finally, the numbers we see as debt from these articles (not the latest information, but the best I could find) is astronomical. In my mind, these debts will NEVER be repaid - how could they!

Perhaps someone with more financial acumen than myself could wade in here and explain the comparative financial position of the USA to that of China.

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