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The total value of China’s government bonds has now exceeded 100 trillion yuan (approximately $14.74 trillion). Experts suggest that while overall risk remains manageable and additional borrowing capacity exists, the government should focus on optimizing its debt structure and enhancing the efficiency of spending financed by debt.
It’s important to recognize that risk assessment should go beyond just looking at the size of the debt. Factors like asset quality, the scale of the economy, and government revenue streams are also crucial, according to Luo Zhiheng, chief economist at Yuekai Securities. The majority of government borrowing has been invested into transportation, water conservation, and energy infrastructure, creating a large pool of high-quality assets. There’s also been progress in addressing hidden liabilities at local government levels.
Recent data shows that China’s government debt reached approximately 101.15 trillion yuan yesterday, up from 95.6 trillion yuan at the end of last year. Its debt-to-GDP ratio stands at around 68%, significantly lower than Japan’s over 200% and the US’s above 100%, indicating relative prudence.
China primarily issues bonds to support medium- and long-term development projects, which contrasts with the short-term borrowing seen in many advanced economies aimed at macroeconomic stabilization. Therefore, the emphasis should be on the structure and effectiveness of debt rather than just the debt-to-GDP ratio, explained Mao Jie, a professor at Shanghai University of Finance and Economics.
Most of China’s debt is domestic, supported by a savings rate exceeding 44%, with external debt making up only about 5% of the total. This structure limits exposure to external economic shocks and allows China to manage its debt internally, according to Yuan Haixia, a fiscal policy expert and director at the China Chengxin International Research Institute. Nonetheless, she warns that persistent risks remain, especially liquidity challenges in regions with weaker fiscal positions and underperforming bonds from special projects.
The rapid annual growth of government debt—over 10% in recent years—outpaces both GDP and fiscal revenue growth, reflecting a necessary policy response to economic headwinds. The key to balancing growth with fiscal sustainability is not the absolute amount of debt but its structure and how effectively it is managed, Luo emphasized.
Yuan Haixia advocates for a shift from simply increasing leverage to optimizing its use. She suggests raising the share of central government debt to enable broader cross-regional and strategic investments. Additionally, she recommends increasing the proportion of general bonds within local government bonds and returning special-purpose bonds to their original intent: being used solely for self-financed projects. Investment priorities should also expand to include not only infrastructure but also sectors like education and healthcare, providing more comprehensive support to people and communities.
Given the rapid growth in debt levels, continuous vigilance is essential to ensure long-term fiscal sustainability, according to Wen Laicheng, a professor at Central University of Finance and Economics.
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