> i.e. the government also has equity ownership in them.
So there are two points to make here.
1. How to measure the debt burden
There is a reason debt sustainability is measured in terms of debt service to revenue metrics as opposed to things like debt to book value, as it's much harder to sell off your company to retire the debt.
I mean, yes, China could decide to privatize all these companies and then wash their hands of the debt. But I think it is a matter of strategic importance for the CCP to control these companies. I could be wrong.
2. How to determine whether a given burden is sustainable
The larger point, though, is that it's never a problem for the Chinese government to run out of money, anymore than it's a problem for the US government. Both governments print their own money. The issue is one of economic management, e.g. is the current policy one that promotes the growth of the chinese economy in a sustainable way? This has nothing to do with running out of money as you can print money. Money is just paper used to get people to be productive. It's a just prop. The real economy is what matters. When people worry about debt, you have to translate their worries into something to do with the real economy. A debt crisis means that the pie of real resources is smaller than people thought it was. You thought you had $100 in the bank, but you only have $50. That's a big deal. The revelation that the pie is smaller is a real economy thing, and it is true even if the banking crisis is averted. E.g. you can tax people and give the money to the banks and the banks will be made whole. That's still recognizing that the pie is smaller. So when we talk about the banking crisis, we do not mean that the government will run out of money, what we mean is that the chinese people will have to bear the cost of reduced real consumption than what they had planned when they were given bonds with a promised interest rate which they thought would pay off.
And there is a structural problem to bailing out failing businesses in terms of misallocation of real resources, as politically connected bureacracies get money but innovative companies do not. That means more real resources are wasted in China. As more real resources are wasted, the economy becomes less efficient and the chinese standard of living either declines or grows more slowly than it should. That is what is at stake here. It is also a problem in the west, where we keep subsidizing politically popular companies at the expense of making the economy more inefficient. This is the main temptation of letting government control the financial system and print its own money.
Balance sheets and sustainability metrics are just bookkeeping to track how many real resources are being wasted. China (and the US) have an enormous amount of real resources to waste, so we are not going to run out of things to screw up any time soon. But if the standard of living does not increase fast enough for people's expectations, it could cause political unrest for those who enjoy spending other people's money on their favorite causes.