More signals Beijing will further expand central borrowing in 2026
Beijing will almost certainly raise the share of central government borrowing next year.
The latest signal: In its September 15 inspection report on 2024 government debt, the NPCSC observed that (NPC 1):
- “The share of central government bonds is relatively low, while that of local government bonds is high”
On the same day, Finance Minister Lan Fo’an also said that Beijing plans to gradually optimize the debt structure to better serve macroeconomic needs (NPC 2).
Some context: For decades, Beijing relied on local government special-purpose bond (SPB) issuance and local government financing vehicle (LGFV) borrowing to fund infrastructure projects and support growth.
More context: Hit by the twin shocks of the pandemic and the property market slump, local governments are struggling to service their borrowing – especially that of LGFVs.
- Since 2023, the central government has ramped up issuance of treasury bonds and special treasury bonds (STBs) to fund infrastructure projects and ease pressures on local budgets.
Still, local governments remain weighed down by massive debt.
- By the end of 2024, t
he official stock of local government debt stood at RMB 47.5 trillion, well above the RMB 34.6 trillion in outstanding central government bonds . - Total LGFV debt, meanwhile, stood at a staggering RMB 65.6 trillion, according to the IMF.
What to watch: We estimate that Beijing will expand central government borrowing by RMB 1-2 trillion in 2026
- We won't know the exact numbers until the Two Sessions in March, but the December Politburo meeting will provide the first indication of how aggressively Beijing intends to move.