Abstract:
Based on the theoretical framework of the national balance sheet approach, this paper constructs a preliminary sovereign balance sheet for China covering the period from 2000 to 2010, using available data and necessary estimations. The results indicate that China’s net sovereign assets remained positive throughout the sample period and exhibited an upward trend. This suggests that the Chinese government holds sufficient sovereign assets to cover its sovereign liabilities, implying that the likelihood of a sovereign debt crisis occurring in China is extremely low in the foreseeable future. An analysis of total debt levels and the aggregate leverage ratio (i.e., total debt-to-GDP) reveals that, although China’s leverage ratio is higher than those of the BRICS countries, it remains significantly lower than that of advanced economies—indicating a generally moderate and manageable level. However, the recent rapid increase in leverage warrants close attention. A sectoral analysis shows that the corporate debt ratio (as a percentage of GDP) is particularly high, representing a distinctive feature of China's balance sheet. By 2010, the corporate debt ratio had exceeded 100%, surpassing the 90% threshold commonly observed among OECD countries, and thus merits heightened vigilance.

Keywords: Balance Sheet Approach; Sovereign Balance Sheet; Aggregate Leverage Ratio