China's debt Essay Example | Topics and Well Written Essays - 1000 words

China's debt - Essay Example The largest banks in China lent more than twice the level of bad debts in the year 2013 as they had in 2012 (Jadhav, Neelankavil & Andrews, 2012). Australian banks have lent China an alarming 75 percent more than their usual amount. Their aim, however, is to gain exposure to Asia’s economy in the powerhouse sector. The World Bank has also been a major lender to the Chinese government but on concessionary terms. These finances, however, arise from indirect contributions of the United States, which is the largest contributor to the World Bank. The finances from China are round- tripping as the U.S. massively borrows from China. China has used its borrowed funds, which are mostly Chinese-owned, in the public sector. Some of the national projects that China has involved itself in using the borrowed funds are the construction of sundry new buildings (Koo, 2013). These constructions include homes and offices, some of which are unoccupied over the years. According to the State grid, the new constructions have zero billing on electricity. The established investment platforms for the local government in 2009 have led to a high increase of the outstanding debt by nearly 70 percent. China’s debt also funded several investments in infrastructure (Bailey, Huang & Yang, 2011). These include roads built in 2011. Infrastructure was more profitable than the boom of construction of houses in China. The Chinese situation of being a state with so much debt has had both positive and negative effects on its people. Due to the construction of new houses by the state in 2011 in a bid to try to evade the economic crisis that hit the world in 2008, property prices increased. The nationals had a problem measuring up to this change. The local government raised interest rates of bonds in the money market in China. The inflation increased in the country characterized by increased loan screening (Liu, 2010). The debts have led to declining economic growth