Global Debt Approaching a Critical Point

Global public debt is approaching a critical economic milestone—$100 trillion, which accounts for about 93% of global GDP. The International Monetary Fund (IMF) presented relevant data in its fiscal monitoring report and estimates that by 2030, this ratio may approach 100%. This trend indicates that the pace of rising global debt levels far exceeds that of economic growth, which could lead to a series of economic problems.

The IMF's warning points out that such high debt levels may negatively impact the market, especially when facing potential future economic shocks; national fiscal flexibility will be weakened. This means that when unforeseen events such as economic crises or natural disasters occur, high-debt countries may lack sufficient fiscal means to respond to these challenges, potentially leading to a more severe economic recession.

US Debt and Market Volatility

As the world's largest debtor nation, the United States has seen its national debt expand rapidly, resulting in a significant rise in interest payments. This situation directly affects its economic stability and development.

According to the latest data, the interest on debt paid by the US this year has reached $1.049 trillion, a 30% increase compared to the same period last year. This growth not only increases the fiscal burden on the federal government but also poses a threat to the stability of financial markets.

Furthermore, the volatility of the US Treasury bond market has become increasingly pronounced. Its level of fluctuation continues to rise, leading to greater uncertainty. The persistent increase in the yield of 10-year Treasury bonds has attracted widespread market attention, as this is typically seen as the benchmark for global borrowing costs. Rising yields may lead to increased borrowing costs globally, thereby affecting investment and consumption and further impacting economic growth.

US-China Economic Strategy Interaction

In this context, the United States has taken a series of economic measures against China, including raising tariffs on Chinese imports, which is seen as a protectionist act aimed at reducing US dependence on Chinese goods and promoting domestic industry development. At the same time, the US has imposed sanctions on Chinese companies, possibly based on considerations of national security and intellectual property protection. However, the rationale behind this approach is still debatable.

In response to the current situation, China has chosen to reduce its holdings of US Treasury bonds and has made corresponding adjustments to its foreign exchange reserve policies. In August 2024, China's reduction of US Treasury holdings reached $1.9 billion, lowering its total to $774.6 billion. This action has attracted widespread attention from the international community and has affected the layout of global financial markets to some extent. This behavior may stem from concerns about the uncertainty of US economic policies as well as a reevaluation of global debt risks. Both of these factors have contributed to the current situation.

Economic Challenges

Global debt levels continue to rise, and fluctuations in the US national debt market have intensified, posing significant challenges to the economies and financial markets of countries worldwide, with potential impacts being substantial. These challenges involve not only debt sustainability and financial market stability but also global economic governance and international relations. In this situation, countries need to strengthen cooperation and jointly seek solutions to debt issues while maintaining market openness and fairness.

However, the controversy lies in the fact that the protectionist measures taken by certain countries may not only fail to alleviate global economic issues but could also exacerbate tensions. Raising tariffs and implementing sanctions may protect domestic industries in the short term, but in the long run, they could damage the stability of international trade and global supply chains. Additionally, further reducing national debt holdings could impact trust in global financial markets, potentially leading to reduced capital liquidity and diminished investment activity. Therefore, the international community needs to consider the common interests of the global economy while maintaining national interests, seeking balanced and cooperative solutions.