How China Pulls Off Running Double-Digit Deficits

Officially, public spending is around 3 percent, but the real number may be five times higher

Chinese yuan notes at a branch of the Industrial and Commercial Bank of China (ICBC), on March 14, 2011 in Huaibei, China. The Chinese government is now spending up to 15 percent of GDP on fiscal stimulus. ChinaFotoPress/Getty Images

For years the world has marveled at China’s foreign exchange reserves ($4 trillion at their peak in 2014) and low government debt, 21 percent of GDP at the end of 2015.

This is about to change, however, as fiscal spending was up 15.1 percent in the first half of 2016 to counter a slowing economy and achieve the official GDP growth target.

“China’s growth rebound in the first half of this year has been strongly supported by an active fiscal policy that has significantly front-loaded on-budget spending and fostered strong growth in off-budget investment in infrastructure,” Goldman Sachs wrote in a note to clients.

 

China's debt distribution. Macquarie