According to a report released by the Institute of International Finance (IIF) on Wednesday (May 6), global debt levels have reached a record high of $353 trillion by the end of March, with the highest proportion held by US and Chinese debts.
The quarterly Global Debt Monitor report by IIF indicates that since the beginning of the year, there has been a continuous strengthening demand for Japanese and European government bonds in the international market, while demand for US treasuries has remained relatively stable.
Emre Tiftik, IIF’s Director for Global Markets and Policy, stated during a webinar discussing the report that “this highlights that some international investors are working to reduce their investments in US treasuries.”
He noted that while the US treasury market, with a scale of $30 trillion, currently faces “no immediate risk,” long-term forecasts suggest that US government debt seems to be increasingly heading down an “unsustainable path,” whereas the debt ratios of the Eurozone and Japan are slowly declining.
The report indicates that under current policy, the US debt-to-GDP ratio is expected to continue rising, while the US corporate bond market is projected to thrive further due to the issuance of AI-related bonds and robust inflow of overseas funds.
IIF’s report states that the borrowing measures of the US government are one of the major factors that caused global debt to increase by over $4.4 trillion in the first quarter, marking the fastest growth rate since mid-2025 and the fifth consecutive quarter of growth. Tiftik mentioned that the increase in US debt is mainly driven by government borrowing.
He also pointed out that the debt growth of non-financial borrowers in China earlier this year, mainly Chinese state-owned enterprises, sharply accelerated, surpassing the borrowing growth of the Chinese government.
However, it is important to note that the transparency of official debt data in China has long been questioned by the international community. For example, Chinese state-owned enterprise debts often have implicit guarantees from the Chinese government, essentially constituting “implicit sovereign debts,” and the official borrowing speeds disclosed by China may not account for a large amount of “hidden debts” such as local government financing platforms (LGFVs). Therefore, the actual borrowing speed of China as a whole may not be lower than that of the state-owned enterprise sector.
Despite China choosing to disclose some data on hidden debts, the scope and completeness of such disclosures remain questionable, leading international analysis to often rely on estimates. The International Monetary Fund (IMF) has repeatedly urged China to enhance data quality, increase asset transparency, and address significant deficiencies in the disclosure of local debts or negative debts.
Apart from the two largest economies in the world, debt levels in mature markets have slightly decreased. Debt levels in emerging markets outside of China have seen a slight rise, reaching a record high of $36.8 trillion, largely driven by government borrowing.
In terms of key debt ratios, global debt as a percentage of world economic output stands at 305%, roughly consistent with levels since 2023. However, the trend of debt ratios mirrors debt levels, showing a downward trend in mature markets and a steady increase in emerging economies.
IIF also predicts that structural pressures, including population aging, increased defense spending, energy security and diversification, cybersecurity, and capital expenditure related to AI, will raise government and corporate debt levels in the medium to long term. Tiftik believes that recent conflicts in the Middle East will further exacerbate these pressures.
(Reference: Reuters)