If it is government debt you’re thinking about, then it’s not an issue. China is a country with monetary sovereignty, which means unlike the eurozone member states or countries with fixed exchange rate, China’s central bank can create as much money as needed.

The fact that China doesn’t is a policy choice, and one that is guided by the IMF.

To put things simply, IMF demands the “balance the budget” playbook, i.e. if you want to spend, you need to earn an income first. The central bank needs to put something on the asset side of its balance sheet as an offset before it can create new money, which goes on the liabilities side. For many countries, that means accumulating foreign currencies e.g. US dollars through exports. It makes their balance sheet look balanced. Maintain deficit <3% of GDP like China does and you get rewarded with a pet on the head by IMF telling you that you’re being so “fiscally responsible”.

Consequently, the export-led growth model is adopted by many developing countries to maximize the ability of these countries to spend domestically, because they have bought into the IMF neoliberal ideology that in order to “climb the global value chain”, you have to earn foreign currencies through exports first (income) before you can spend. Entire economies have been re-oriented to serve the export market, labor and resources spent to produce cheap goods to sell to wealthy foreign countries, often at the expense of their own people.

After the 2008 GFC, export revenue fell in China and the infrastructure investment phase begun to shift the economic focus away from the export market. Unfortunately, because of this balance the budget rule, instead of directly creating new money through the central bank to finance the infrastructure building, they (both the central and local governments) instead borrowed from financial institutions.

This caused the local governments to rack up tons of hidden debt at high interest rates. Initially, the plan was to pay them off by driving the land prices up through massive housing and infrastructure development. Unfortunately this has not materialized, especially with Covid hitting the world in 2020. Property prices already peaked around 2019 and the plunge in asset prices resulted in many local governments to owe huge sums of debt that they no longer have the ability to repay (through selling land). The deterioration of this situation is somewhat slowed by the government spending huge amount of wealth to cushion the falling property market prices, at the expense of the rest of the people. That’s why the wealth is being funneled away from the people, because the alternative is a financial market crash (mass mortgage defaults -> land prices fall -> local governments and banks losing their income). As such, the costs are being socialized.

The solution as I have said is to simply allow the central bank to create the money needed to solve the economic problem. I don’t really think much need to be said about this - if the government/central bank directly creates the money, then people will have the money to stimulate the economy directly, and local governments, corporations and households will not have to borrow as heavily from the financial institutions.

Nonetheless, we are already at a situation where the debt burden is already so pervasive that trying to undo everything without causing more problems is going to be very difficult. The debt will have to be cancelled somehow, but at such a large sums, there are going to be winners and losers. And the losers aren’t gonna like it.

And they don't have the infinite USD printer to fall back on.

If the money you print goes to socially valuable labor that generates more than it costs, you kinda do have infinite money (as much as you have the economic development to make use of, at least).