The Dragon’s House of Cards: China’s Debt Could Total 400% of GDP
Last month marked the collapse of China’s Evergrande, once the world’s most indebted developer with $300 billion in liabilities. The real estate sector remains a debt bubble, fueled by roughly $695 billion in new government-approved loans.
While the property crisis has been widely reported, the broader scale of China’s debt problem is less understood. Official figures show that public and private debt combined already exceed 309% of GDP, yet even this number understates the true scope.
When other sources of leverage are factored in, such as margin trading, shadow banking through wealth management products, and off-balance-sheet local government borrowing, China’s total debt burden climbs to at least 400 percent of GDP.
China’s long-anticipated post-pandemic rebound never arrived. Instead, 2024 exposed deep structural weaknesses and a government unwilling to enact meaningful reforms. The Third Plenum, the central government’s economic planning session, passed without major policy shifts, leaving the economy weighed down by debt, a faltering property sector, weak consumption, and a constrained private sector.
Household consumption has also failed to recover. Retail sales remain well below pre-pandemic trends, as falling property values create a negative wealth effect. High unemployment, especially among the young, has further dampened spending.
The most visible problem is real estate. Years of overbuilding left millions of unsold apartments and developers like Evergrande collapsing under impossible debts. Housing sales have fallen below 2017 levels, and government rescue schemes, such as buying up vacant units, are far too small to stabilize the market.
All of these pressures have fueled China’s mounting debt bubble. By mid-2025, total social financing, the broadest measure of combined debt, had reached about $59 trillion, equal to 309% of GDP.