As the world’s biggest economy and a major trading partner, China has long been the main beneficiary of cheap debt.
Its exports to the US have soared since the end of the financial crisis, and its debt to GDP ratio has jumped from 7 per cent to more than 40 per cent.
But its borrowing costs are among the highest in the world, and it is also grappling with its own economic challenges.
Here’s what you need to know about how China might be hit hardest.
What’s the latest on the crisis?
China’s debt crisis has caused the economy to slow, as its banks and other lenders have lent out too much.
But it has not yet affected growth as it has since late March, when its benchmark rate was lowered to 6 per cent from 7.5 per cent in response to the crisis.
The central bank has already cut interest rates on $US1.4 trillion of debt and has also tightened financial regulations.
That will boost growth, but the government is now considering tightening controls on financial activity.
The US has been hit hard by the crisis as well.
Its government is trying to get its finances in order and has already set aside $US2.7 trillion to help those struggling to pay their debts.
The European Union has been on a fiscal stimulus drive and its deficit is shrinking as the continent’s biggest economies look to balance their books.
But China has yet to experience the kind of economic downturn that hit the US.
It is expected to be the fastest-growing economy in the developing world this year, and could become a leading power in a global race to dominate the next generation of global supply chains.
What countries are in trouble?
China is already the world leader in the use of debt to finance economic activity, with more than $US4.5 trillion in its coffers.
It has the largest economy in Asia and the world.
In addition to China, its debt load has grown in the past five years, as countries around the world seek to lower their debt burdens.
Australia is in the middle of a financial crisis.
A key driver is the state of the Australian dollar, which has been in a near-freeze.
The Reserve Bank of Australia says the currency has fallen in value by more than 2 per cent since mid-June.
The economy is also expected to shrink in 2017.
Other key drivers include a falling Australian dollar and slowing commodity prices.
Key questions to ask on the latest global economic crisis: What’s happening to the Australian economy?
The Australian economy is struggling to recover from the financial shock of the global financial crisis and the country has had to spend more on unemployment benefits, infrastructure spending and a range of other things.
It could see further declines in GDP growth this year.
How bad is the problem?
China has a debt burden of $US3.2 trillion and is forecast to have $US400 billion of its debt burden outstanding by 2019, according to the Bank of International Settlements.
In the past year, China’s economy has contracted by a quarter.
Its economic growth rate is forecast by the IMF to be around 4.5 percentage points lower than that of the world average in 2017, with the gap widening further.
A weaker dollar could hit Australia harder, especially if China’s imports of Australian goods remain strong.
What should Australia do?
Australia’s economy is already a major global export market and has been the fastest growing since the financial crises of 2008 and 2009.
The Australian dollar is a key driver of trade.
If the Australian currency is weaker, the Australian manufacturing sector is going to suffer and the economy will shrink further.
Australia has also already cut back on its infrastructure spending in response.
But the government will now consider tightening restrictions on foreign investment, particularly if China continues to expand its economic activity.
Australia’s budget surplus will be hit harder than many other countries because it has to meet some of its economic obligations, including debt repayments.
The Commonwealth’s deficit has been cut in recent years, partly due to the government’s policy of reducing spending.
But that will not be enough to offset the cuts in public spending that will occur if the Chinese economy slows further.
Will China be a major player in the next decade?
China remains the world leaders in the demand for foreign exchange and it has a growing role as a global money-laundering centre.
But for a long time, it has had a relatively low profile in the global economy.
China is expected not to be a big player in global trade, as it is not a big financial player.
But as its economy slows, its trade deficits will increase, and that will further damage the Australian industry.
What are the alternatives?
China could also use the global trade surplus to boost domestic growth, as exports to Asian nations have increased significantly.
But some analysts have warned that that strategy will be a losing strategy if China is unable to meet its financial commitments to other countries.
The Government should focus on stabilising the Australian financial system and reducing debt levels, while avoiding a sharp reduction in exports and investment.
Key issues ahead