Source: Credit Suisse
Source: Credit Suisse

Perhaps the biggest piece of fake news in the economic sphere is the claim that China faces an unsustainable debt burden that will lead to a hard landing or, at very least, to a very uncomfortable adjustment. That’s like saying you are poor if you owe $500,000 on your mortgage, without mentioning that your house is worth $1 million.

According to the Credit Suisse Global Wealth Survey, Chinese households have the lowest ratio of debt to wealth of any major economy in the world–only 9% as of mid-2016, compared to roughly 25% for Australia, Switzerland and Sweden.

How about government debt? According to the IMF, gross government debt in China (including all the odds and ends of local government debt) is 65% of GDP, vs. 105% in the US.

Corporate debt? The 3,500 companies in the Shanghai Composite Index show a debt/assets ratio of 26%, vs. 24% for the companies in the S&P 500. We’re willing to assume that a lot of the SHCOMP’s assets are overstated and a lot of the debt of state-owned enterprises is dodgy, but that is money that the government owes itself–and the state’s debt burden is half of that in the United States.

All in all, China has localized debt problems, particularly among inefficient state-owned companies, but it doesn’t have an aggregate debt crisis. According to the Credit Suisse data, the wealth of Chinese households has quintupled since 2001.