Is Xi Jinping A Genius? Maybe. But, Also Maybe Not.

Good Afternoon, Comrades,

There are very few things that get an economist’s juices flowing quite like China. It’s basically an economic theme park-except every ride is sponsored by a state-owned bank, half of them violate basic engineering standards, and all the exits are “conveniently” blocked by capital controls so tight they make TSA look like a joke. If you’ve ever wondered what happens when an entire nation collectively decides to speedrun infrastructure spending, turbocharge real estate speculation, and play a national game of “how much leverage can we add before God intervenes?” Well, buckle up, because China is about to find out.

People love to point fingers at the United States and say, “Wow, the national debt is a nightmare,” and honestly, fair. U.S. debt now exceeds 140% of GDP, which is objectively bad and also the fiscal equivalent of waking up after a night out and checking your credit card statement.

But China? China looked at that number and said, “Hold my baijiu bitch.”

Its total debt has soared past 300% of GDP. Three. Hundred. Percent.

Let’s begin with the real estate market, which for years has functioned as China’s unofficial national religion. Housing contributes 23-30% of GDP (IMF 2023; OECD 2024), which is totally normal and not at all a giant flashing red sign of systemic overreliance. Developers like Evergrande and Country Garden racked up liabilities larger than the GDP of some mid-sized countries (Evergrande filings 2023; Country Garden reports 2024), while an estimated 65 million vacant homes sit unoccupied across the country (China Household Survey 2023; UBS 2024). The growth engine that once roared is now sputtering like my dying John Deere lawnmower, except lawnmowers don’t generally spark global financial contagion.

Let’s move on to state-owned enterprises, or SOEs, which represent the spiritual opposite of efficient capitalism. SOEs hold around 55% of China’s corporate debt (OECD 2024), despite consistently delivering the economic performance of a soggy napkin. They survive not because they’re profitable, but because the government keeps funneling loans into them like a parent who refuses to admit their kid isn’t getting into Harvard. Banks can keep beeping and booping money into existence, so SOEs keep spending, and everyone pretends this is fine because acknowledging the alternative would require rewriting the entire political economy.

Then there are the local governments, who, barred from running formal deficits, decided to invent Local Government Financing Vehicles (LGFVs) so they could run creepy, convoluted shadow deficits instead! These LGFVs have accumulated $12-13 trillion in debt (IMF 2024; Goldman Sachs 2023), much of which funded infrastructure so enormous that it makes U.S. public works projects look like poorly funded bake sales. At the center of this infrastructure is China’s high-speed rail network: the largest, fastest, shiniest, and quite possibly least profitable transportation system on earth. China Railway Group alone carries over $900 billion in debt (CRRC Bond Filings 2024), and 70-80% of existing lines lose money every year (China Development Research Center 2023). It is a marvel of human engineering, a triumph of logistics, and a financial black hole that could probably swallow the moon.

And yet, in the midst of this fiscal chaos, Chinese bond yields remain suspiciously low. Ten-year yields hover around 2.2-2.4%, compared to the U.S. rates around 4-5% (People’s Bank of China 2024), which is strange because markets typically demand higher yields when risk rises, but “markets” in China operate more like well-trained houseplants. Capital can’t leave the country, banks are basically told what to buy, and the bond market behaves because the only other option is being publicly spanked by the central bank.

Meanwhile, Chinese consumers remain allergic to spending money. The household savings rate sits around 45% (NBS China 2024), which is astronomically high compared to America’s “we save whatever’s left over after impulse-buying a kayak on Amazon” rate of 4%. Consumption makes up only 38% of China’s GDP (World Bank 2023), compared to 68% in the U.S. Combine this with youth unemployment estimates in the 14-20% range (NBS China 2023; Caixin 2024), and you get a consumer base that would rather stuff cash in their mattress than stimulate the economy. Beijing can shout “spend!” all it wants, but it’s hard to convince people to buy a new fridge when the job market resembles a skeleton.

So, is China going to collapse? No. Beijing has enough financial duct tape, political influence, and state-directed credit to prevent a catastrophic implosion. But will the economy feel like it stepped on a LEGO barefoot? Without question. The borrow-build-repeat model that powered 30 years of decade-defining growth has run headfirst into diminishing returns, demographic decline, and the mathematical limits of debt sustainability. Ghost cities don’t magically fill themselves, SOEs don’t suddenly become competitive, and unprofitable rail lines stubbornly refuse to make money, no matter how many patriotic slogans you slap on them.

In the end, China’s debt crisis isn’t an explosion. Instead, it’s more of a slow-motion implosion, wrapped in a high-speed rail bow and delivered with the confidence of a government that believes it can outrun balance sheet gravity through sheer political will. It’s financially terrifying, economically fascinating, and, in the way all global macro disasters are, kind of beautiful to watch. Please enjoy this analysis before the Great Firewall decides it counts as “subversive content.” (I’m willing to take bets on how much “social credit” I’ll lose from writing this).