China may allocate 19.2% of the total central government budget in 2026 to debt interest payments, compared with 12% in 2014. Fortune reports, citing Conference Board estimates quoted by the Financial Times.
Debt servicing costs are rising amid slowing economic growth in China, weak domestic demand and problems in the real estate sector. At the same time, Beijing is directing funding from state-owned banks to priority areas, including electric vehicle manufacturing, robotics, artificial intelligence and renewable energy.
Interest payments have become the fastest-growing spending category
The Center for Strategic and International Studies (CSIS) had previously estimated the share of interest payments in Beijing’s expenditures at about 19%. This is higher than the 14% of the US federal budget allocated to debt servicing, but lower than Japan’s 25.6%.
According to CSIS calculations, China’s interest payment costs increased by 341% between 2013 and 2025, faster than any other major budget category. Over the same period, total government spending rose by 102%, spending on social security and employment by 207%, on science and technology by 137%, and on defense by 141%.
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Debt exceeded 100% of GDP
According to the International Monetary Fund, China’s gross general government debt reached 107% of GDP this year. By comparison, it stood at 41% of GDP in 2015. The IMF forecasts that it will rise to 124% of GDP in 2030.
Capital Economics estimated China’s combined public- and private-sector debt, excluding the financial sector, at more than 300% of GDP. According to the company, corporate debt has doubled since 2019, while revenues have risen by only 30%. Nearly one-third of companies whose loans creditors continue to roll over are operating at a loss.
Capital Economics’ chief Asia economist, Mark Williams, noted that efforts to support economic growth and avoid job losses contributed both to government borrowing and to looser lending standards at state-owned banks.
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