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Original Financial Times article is behind paywall.

China’s growing debt burden limits the authorities’ ability to provide massive stimulus to boost economic growth and revive weakening domestic demand. About it writes the Financial Times (FT) with reference to studies of public finances of China.

According to the analysis of the non-profit research center Conference Board, this year debt service will require 19.2% of the total state budget. In 2014, this figure was 12%.

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The debt problem is particularly acute in China at the level of local authorities, where interest payments on debts have grown by an average of 16% annually since 2014. According to the forecast of the center, in 2026, the aggregate interest payments on debts in central and regional governments will amount to about 1.4 trillion yuan ($ 209 billion).

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“Debt servicing is becoming a significant constraint on local budgetary opportunities,” said Yuhan Zhang, lead economist at the Conference Board.

China’s debt has skyrocketed in the past few years due to an investment-driven growth model […] China’s public debt will reach 122% of GDP, which is 48% higher than the level that was before the coronavirus pandemic began in 2020.

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A five-year slump in the Chinese real estate sector has worsened the financial position of households and regional authorities, despite Beijing’s pledge to boost domestic demand more actively. In the second quarter of 2026, the country’s economic growth slowed to 4.3%, below the target range of 4.5-5%. The newspaper points out that this is due to weakening retail sales and a sharp decline in fixed investment.

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China’s military spending accounts for 42% of central government spending, accounting for 15% of the total state budget.

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