China’s debt-to-GDP ratio increased to a record high of 287.8 percent in 2023, according to a quarterly report published by a state-backed think tank, the National Institution for Finance and Development (NIFD). The 2023 number represents a 13.5 percent increase from the 2022 debt-to-ratio number of 274.3 percent.

Specifically, the debt ratio by households rose 1.3 percentage points to 63.4 percent, and the government debt ratio increased by 5.3 points to 55.9 percent. However, the ratio for nonfinancial corporations saw the biggest increase, with an expansion by 6.9 points to 168.4 percent.

The report also said that the corporate, government, and household sectors’ total liabilities increased at a slower pace of 9.8 percent in 2023, which was largely unchanged from last year.

The NIFD said that both the reduced debt expansion and the significant rise in China’s macro leverage ratio were due to the slowdown in nominal economic growth. The think tank said that another decline in debt growth would have a more significant impact on the Chinese economy.

They recommended the government implement various endeavors, such as increasing policy support, to revive domestic demand and growth. The report also recommended setting the nominal GDP growth target at 7 percent and injecting more stimulus if the goal is not met.

However, they suggested that to boost nominal GDP growth by maintaining the fiscal deficit at certain levels, the government should borrow more to help local authorities reduce their debt burdens.