China's high and rising debt is one of the great conundrums for global investors - how much more can the bubble inflate before it pops and what are the consequences when it does? The answer might best be framed in the opportunity that a predominantly domestic debt overhang presents to international asset markets. On the face of it, the size and scale of the debt build-up since the 2008 financial crisis is one of the largest ever seen in the past 50 years to currently stand at about 250 per cent of gross domestic product. But external debt is miniscule, at barely 8.5 per cent of GDP, according to the economics team at Goldman Sachs. "The fairly low level of external debt in China points to large potential to diversify the domestic financial risks to the global markets going forward. In particular, we see scope for the government to continue expanding quota-based foreign investment channels, which can allow more foreign funding to finance Chinese growth," the team writes. It is time to get the rest of the world to start paying for the growth it increasingly relies on.
