Quora Answer: Why are the USA & Singapore Treated with Greater Respect Than China?

The following is my answer to a Quora question: “Why are the USA and Singapore, with debt to GDP in excess of 100%, treated with greater economic respect than China, with a ratio of below 60%?”

The question is ambiguous.  What do you mean by “greater economic respect”?  I take it you mean credibility?   What we can do is take a look at the numbers.  As of 01^st May 2020, the federal debt is US$24.95 trillion.  Although it is a staggering number, it is still less than 80% of GDP.  It is projected to rise to around 100% of GDP before the end of the decade.  Much of that debt is held internally, by other branches of the US government, by American corporations, pension funds and other entities.  Whilst the US has the largest external debt, less than 30% of it is actually held by foreign entities, including sovereign entities.  Despite the political brouhaha in the US, as long as that debt interest is sustained by GDP growth, it is not a cause of concern for investors.  Also, the US Dollar being the currency of refuge, and the currency for most trades, means that the United States can get away with this level of debt.

Singapore’s national debt was around 130% of GDP at the end of 2019, and will likely rise because of the pandemic lockdown.  Like the US, most of that debt is held internally, the vast majority borrowing from the Central provident Fund.  Additionally, Singapore has a huge Reserve, with estimates ranging from the hundreds of billions to over a trillion.  Singapore has two sovereign wealth funds, and a separate foreign reserve under MAS that is over US$300 million.  As such, that debt is very much sustainable.

China’s debt to GDP ratio is estimated at over 300% of GDP, which is more than the US and Singapore.  This is hard to quantify because China is very secretive about her borrowings, and has this habit of borrowing through state-owned enterprises and other entities.  There is no question here about the size and strength of the Chinese economy.  No one sane s predicting that China will suffer an economic collapse anytime soon.  China has the largest GDP overall, and the GDP PPP is the largest in the world by some distance.

When it comes to credibility, however, China suffers because her penchant of wanting to control the narrative despite the facts makes her distrusted.  No one takes the official economic data of China at face value, because the Chinese are not honest about their numbers.  Even the most mundane data is treated like state secrets.