World
Debt, Demographics, and Diminishing Returns in China
— 2 mins read
China's debt tops 300% of GDP while its population shrinks for a fourth year
China's total debt has climbed past 300% of GDP at the same time as its population has fallen for a fourth consecutive year. A shrinking workforce must now carry a bill that keeps getting bigger.
A debt pile three times the size of the economy
China's combined government, corporate, and household debt reached roughly 312% of GDP in 2024, according to figures tracked by the Institute of International Finance. Local government borrowing, much of it hidden in off-the-books financing vehicles, is the main focus of Beijing's clean-up efforts, as OMFIF analysis of China's debt ceiling rise sets out.
The property sector sits at the centre of the mess. Evergrande was liquidated in 2024. Country Garden reported heavy losses and is restructuring its debts. Banks are carrying bad loans linked to property and local government borrowing, and analysts widely believe the official figures understate the problem.
Beijing has avoided an outright banking crisis by propping up weak lenders and letting struggling firms roll over debts they cannot repay. The cost is slower growth and a corporate sector stuffed with companies kept alive on support.
Fewer workers, fewer babies, bigger bills
China's population fell again in 2025, to around 1.404 billion. Births dropped to 7.92 million, a modern low, and the fertility rate sits near 1.0, well below the 2.1 needed to keep a population stable, according to Rhodium Group research on China's demographic future.
The working-age population peaked around 2015 and has shrunk ever since. Roughly 23% of Chinese citizens are now aged 60 or over, straining pension systems already under pressure in many provinces.
A shrinking workforce must now carry a bill that keeps getting bigger.
The jobs picture for the young remains difficult. Urban youth unemployment stood at 14.9% in June 2026 after peaks above 16.9% earlier. A record 12.7 million graduates are expected to enter the job market this year.
America pulls away
Tariffs and export controls under President Trump have pushed companies to move supply chains out of China. China's share of US goods imports has fallen since 2018, with Vietnam, Mexico, and India picking up the trade. Some bilateral terms have shifted, though disputes over subsidies and market access remain unresolved.
American manufacturing has gained in semiconductors and batteries, with Reshoring Initiative data tracking a strong pipeline of announced factory jobs, though actual hiring remains more modest. The US has also been a net energy exporter since 2019 and set a record in 2025, according to US Energy Information Administration figures, removing a pressure point China once held.
What Japan shows, and what it does not
Japan carries public debt above 250% of GDP without crisis, largely because its debt is held at home at low rates. China's burden is different: heavier on companies and local government vehicles, and harder to contain quietly.
Beijing continues working through property and local government debts, with growth still subdued against pre-2020 trends.
