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Carol Yang

As the United States grapples with mounting debt, China is doubling down on efforts to clean up its own balance sheet, vowing to tackle risks with “iron discipline”.
The pledge came as the world’s second-largest economy weathers a years-long real estate slump and cooling domestic demand. Beijing faces growing pressure to balance short-term growth targets with longer-term deleveraging, as it seeks to transition to a more sustainable economy.
In the government work report delivered on Thursday to Beijing’s annual parliamentary session, Premier Li Qiang said “curbing the growth of non-compliant hidden debt must be enforced with ‘iron discipline’.”
Li urged local authorities to proactively defuse debt risks and strictly guard against “fake debt reduction”.
China and the US accounted for a large share of the global increase in debt last year, the Institute of International Finance (IIF) reported last week. Global debt climbed to a record high, rising at its fastest annual pace since the pandemic.
Data from the Washington-based institution showed that China’s government debt rose to 96.8 per cent of gross domestic product by the end of 2025, up from 88.4 per cent a year earlier.


That level remained below that of the US, where government debt climbed from 119.9 per cent of GDP to 122.8 per cent over the same period.
Compared to the administration of US President Donald Trump, which has expanded borrowing to record debt levels, the Ministry of Finance issued a stern warning to indebted local authorities.
Also on Thursday, China’s 2026 budget report, prepared by the ministry, highlighted a strengthened oversight regime to contain new hidden debt, promising a “zero-tolerance” approach through intensive supervision.
“Officials will face lifelong accountability and retrospective investigations for any non-compliant borrowing,” the report stated.
To provide more fiscal room, the ceiling for central government debt was raised to 48.55 trillion yuan (US$7.04 trillion), according to the report. To facilitate debt swaps at the local level, the special debt ceiling was increased to 44.32 trillion yuan, while the general debt limit was capped at 18.87 trillion yuan.
Local governments are set to issue 4.4 trillion yuan in new special-purpose bonds, the same amount as last year.




The finance ministry also pledged to accelerate the restructuring of local government financing vehicles, stripping them of their government financing functions. It stressed the need to strictly prohibit the creation of new platforms, or the repurposing of existing entities, as disguised borrowing channels.
The ministry also called for strict adherence to the budget, banning any spending that exceeds or bypasses approved limits and imposing rigorous controls on any adjustments.
As China enters the first year of its 15th five-year plan – its half-decade blueprint for socio-economic development unveiled on Thursday – it has pledged to strengthen long-term mechanisms for identifying and resolving risks in crucial sectors.
The plan mandated addressing risks in real estate, local government debt and small and mid-sized financial institutions, all aimed at fortifying the economy against systemic shocks.
Across the Pacific, the International Monetary Fund forecast last week that keeping the US’ overall deficit at 7 to 8 per cent of GDP could push public debt to about 140 per cent of GDP by 2031, an upwards trajectory it warned “represents a growing stability risk to the US and global economy.”


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Global debt reached a record high in 2025 and rose in the world’s two largest economies


Global debt reached a record high in 2025 and rose in the world’s two largest economies.


China pledges ‘iron discipline’ to tackle debt risks as US borrowing under Trump surges

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Global debt reached a record high in 2025 and rose in the world’s two largest economies

Global debt reached a record high in 2025 and rose in the world’s two largest economies