China's Enormous Debt Burden: A Closer Look

China is facing a significant debt crisis at home, with trillions of dollars owed by local governments, their financial affiliates, and real estate developers. While China has lent nearly $1 trillion to developing countries, it has been reluctant to cancel large debts owed by struggling nations. China's state-controlled banking system is wary of accepting losses on foreign loans when it faces greater losses on loans within China. Official data on China's debt is limited, but researchers estimate that overall debt within China has reached 282 percent of the country's annual economic output. The rapid accumulation of debt relative to its economy makes managing it more challenging. The debt troubles have also made it difficult for Chinese banks to accept losses on their loans to lower-income countries, which now face considerable economic difficulties.