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China’s central government is expected to issue over CNY12 trillion (approximately USD1.7 trillion) in new debt next year, with the fiscal deficit ratio anticipated to be at least 4 percent, according to financial analysts.
As China moves towards a more proactive fiscal policy in 2026, the first year of its new Five-Year Plan, new government debt is projected to reach around CNY12.9 trillion. Experts estimate that the issuance of local government special bonds will increase to roughly CNY5 trillion from CNY4.4 trillion this year, while special treasury bonds could rise to about CNY2 trillion from CNY1.8 trillion.
The budget deficit ratio—comparing the government’s shortfall to the overall economic size—may stay roughly consistent with this year’s levels. After a 1 percentage point increase in 2025 to a record high, analysts believe the ratio will stabilize moving forward.
China aims to sustain a relatively high economic growth rate of 4.5 to 5 percent next year. However, external factors such as tariffs and a rebalancing in the real estate sector mean that fiscal policy will need to support increased domestic consumption and investment.
If the country targets a 5 percent growth rate in 2026, the deficit ratio would likely need to be raised to between 4.5 and 5 percent, corresponding to a budget shortfall of approximately CNY6.6 trillion to CNY7.4 trillion. This would result in new government debt potentially jumping to between CNY15.5 trillion and CNY16.3 trillion.
Reflecting on previous Five-Year Plans, the initial years have traditionally seen a slight expansion in fiscal policy, primarily to spark confidence and stabilize expectations at the start of a new economic cycle. Although current macroeconomic conditions differ, the core strategy remains similar.
Next year’s budget will likely prioritize funding for major projects, especially as ongoing efforts to secure livelihoods demand increased spending. Experts predict that overall public budget expenditure will rise by over 4.5 percent, exceeding CNY31 trillion (roughly USD4.4 trillion) in 2026 compared to this year.
Priority should be given to improving healthcare, education, and elderly care systems to strengthen social safety nets. Simultaneously, fiscal measures should focus on stimulating domestic consumption, supporting new consumer sectors such as digital, green, and smart technologies, and promoting cultural tourism, sports, health, entertainment, and other emerging service industries.
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