Abstract: On the basis of an extended AK model, an optimal ratio of public debt to GDP can be derived in theory. This ratio depends on the four factors, i.e. a country’s output elasticity of public capital, the ratio of public capital from tax revenues, the proportion of public debt converting into public capital and the ratio of government revenue to GDP. The overall public debt scale in China has not yet hit the debt threshold, there exists certain room for borrowing money; however, the public debt levels in some regions have been on the edge of danger, which requires an urgent “brake”.

Key words: optimal public debt; economic growth; debt threshold; AK model