Global Debt Approaching 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 this data in its fiscal surveillance report and estimated that by 2030, this ratio could 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 warnings indicate that such high debt levels could have negative impacts on the market, particularly in the face of future economic shocks, as the country’s fiscal flexibility would be weakened. This means that when unforeseen events such as economic crises or natural disasters occur, highly indebted nations may lack sufficient fiscal means to respond to these challenges, potentially leading to more severe economic recessions.
US Debt and Market Volatility
As the world's largest debtor nation, the United States has seen its national debt expand rapidly, leading to a significant increase in interest payments. This situation directly affects its economic stability and development.
According to the latest data, the interest paid on US debt this year has reached $1.049 trillion, an increase of 30% compared to the same period last year. This growth not only adds to the federal government's fiscal burden but also poses a threat to financial market stability.
Moreover, the volatility of the US national debt market has become increasingly pronounced. The degree of fluctuation continues to rise, leading to greater uncertainty. The sustained increase in the yield of 10-year Treasury bonds has attracted widespread market attention, as this is typically viewed as a benchmark for global borrowing costs. The rise in yields may lead to increased borrowing costs globally, thereby affecting investment and consumption, 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 imported goods from China, viewed as a protectionist act aimed at reducing US reliance on Chinese products and promoting domestic industry. 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 for this approach remains debatable.
In light of the current situation, China has chosen to reduce its holdings of US national debt and has made corresponding adjustments to its foreign exchange reserve policy. In August 2024, China’s reduction of US national debt reached $1.9 billion, bringing its holdings down to $774.6 billion. This action has drawn widespread attention from the international community and has influenced the layout of the global financial market to some extent. This behavior may stem from concerns about the uncertainty of US economic policy and a reassessment of global debt risks. These two factors have led to the current situation.
Economic Challenges
Global debt levels continue to rise, and volatility in the US national debt market has intensified. This trend poses significant challenges to the economies and financial markets of countries around the world, with potentially significant impacts. 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 to jointly find solutions to the debt problem while maintaining market openness and fairness.
However, the controversy lies in the fact that certain countries' protectionist measures may not only fail to alleviate global economic issues but could instead exacerbate tensions. Increasing tariffs and implementing sanctions may protect domestic industries in the short term, but in the long run, they could undermine international trade and the stability of global supply chains. Furthermore, further reductions in national debt holdings could impact trust in global financial markets, potentially leading to decreased capital liquidity and reduced investment activity. Therefore, the international community needs to seek balanced and cooperative solutions while safeguarding national interests and considering the common interests of the global economy.