China still struggling to manage debt expansion following 2008 crisis, claims USCC report

Amid the devastating COVID-19 pandemic, the economic commission has revealed that the Chinese Communist government is facing an unprecedented debt, ANI reported on Thursday. According to the report published by the US-China Economic and Security Review Commission (USCC), an independent agency of the United States government, China's debt burden has further increased during the COVID period. In a surprising revelation, the annual report claimed that the country's financial system still struggling to manage the 2008 global financial crisis.

China's financial system under turbulence since the 2008 crisis

Notably, USCC is a bipartisan commission created by Congress in 2000 to monitor and report on trade, economic, and defence issues in the US-China relationship. It is worth noting that Prime Minister Xi Jinping led government had launched a deleveraging campaign amid fears over growing instability in the financial system. Notably, deleveraging means when a firm or country cuts down its financial leverage or debt by boosting capital, or auctioning off assets or making cuts where necessary. However, this did not help the country to address the issues properly, resulting in the soaring of debt on "Dragon". Further, the 551 pages report of the USCC said the Chinese Communist Party used fiscal stimulus measures to address the economic slowdown caused by COVID-19 in the past two years. 

"By the end of the fourth quarter of 2019, China's total credit reached 262.9% of its GDP at USD 37.2 trillion (RMB 259 trillion), up from 178.8% at the end of 2010," read the data of the Bank for International Settlements. "China's debt growth accelerated between the end of 2019 and the end of 2020, rising to 289.5% of GDP."

China's debt-trap diplomacy still keeping countries under its clutch

Earlier in December last year, China's former finance minister Lou Jiwei admitted that the Communist government was facing debt and added it would further increase in the coming years and gradually become a threat to future financial stability and economic security. However, he pointed that the government started working on debt reduction and added "deleveraging" as one of the "five major tasks" for the Communist government this year. 

Despite facing severe debt issues, China has been lending a hefty amount to other countries to keep the country under its clutch. Notably, China’s debt-trap diplomacy earlier made Sri Lanka lease out its Hambantota Port for 99 years, and now Pakistan's One Belt, One Road (OBOR) initiative are the best example of its "debt-trap" policy.

With inputs from ANI

Image: Pixabay/AP