Is China's $26 Trillion In Public And Private Debt A Threat To The Global Economy?

Bloomberg's David Gura discussed China's $26 trillion worth of public and private debt during a ""Bloomberg Markets" segment.

Gura stated that China's debt "splurge" has soared to nearly 250 percent of its GDP at the end of 2015. The figure includes corporate, household, government and bank debt.

At the end of 2014, China's debt levels were 164 percent of the nation's GDP. Gura pointed out that the jump from 2014's level to 2015 was faster than the increases seen in the United States and the U.K. in the run-up to the 2008 financial crisis.

China's "borrowing binge" traces its roots to 2008, when the government ordered cities to construct roads bridges and other local products to "keep the economy pumping."

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Gura continued that the "frantic pace" of new loans makes it harder to estimate what value of loans won't be repaid. This may be an even larger problem when considering that China's peak borrowing is expected to represent around 280 percent of its GDP in 2019.

"Optimists say concerns about China's debt are overblown, companies and local governments can simply grow their way out of the problem," Gura said. "Pessimists say the problem is not self correcting and they expect policy makers to tackle non performing loans."

Nevertheless, he said, "There is a risk that China's debt could remain a drag on global growth for decades."