FT says debt costs constrain China’s room for stimulus

Rising debt costs are reducing China’s fiscal room to support domestic demand, the Financial Times reported, citing a new 2026 forecast from the Conference Board.

Debt servicing is projected to consume 19.2% of the central government’s general public budget, compared with 12% in 2014. This figure concerns the central government specifically.

Combined interest payments by central and local governments are forecast at about 1.4 trillion yuan. Local authorities’ interest costs have risen by an average of 16% annually since 2014.

Morgan Stanley estimates government debt will reach 122% of GDP by year-end. That is an analytical forecast, rather than a final annual figure.

The FT links fiscal constraints to the property downturn and weak demand. Economists see scope for additional central-government borrowing, but consider Beijing more inclined toward targeted technology support than broad stimulus.