China’s debt interest payments are consuming a growing share of government spending, with servicing costs expected to account for 19.2% of the central government’s general public budget this year, according to Conference Board estimates.
The proportion has risen from 12% in 2014, highlighting the mounting pressure created by years of borrowing as economic growth loses momentum.
A separate analysis by the Center for Strategic and International Studies put the figure at about 19% of Beijing’s spending. That compares with 14% for the US federal budget and 25.6% in Japan.
China’s interest bill increased by 341% between 2013 and 2025, making it the fastest-growing major category of government expenditure, the CSIS report found. Overall spending rose by 102% over the same period, while outlays on social security and employment climbed 207%, science and technology 137%, and defence 141%.
China’s debt burden grows as growth slows
The figures come as China’s economy continues to decelerate. Gross domestic product is on course to fall short of the government’s annual target of between 4.5% and 5%, while consumers remain cautious, investment is weak and the property market continues to recover from a severe downturn.
Export-focused industries have continued to expand rapidly, but trading partners are introducing barriers. Chinese shares have also remained subdued.
Beijing has directed state-owned banks to lend to priority sectors including electric vehicles, robotics, artificial intelligence and renewable energy. However, the pressure to provide financing has also resulted in loans to questionable borrowers.
Business debt has doubled since 2019, while revenues have risen by only 30%. Creditors have continued rolling over loans to keep struggling companies afloat, even though almost a third of businesses are loss-making.
The International Monetary Fund estimates that China’s general government gross debt has reached 107% of GDP this year, up from 41% in 2015. It is projected to rise to 124% by 2030.
A broader measure covering public and private borrowing, but excluding the financial sector, puts China’s total debt at more than 300% of GDP, according to Capital Economics. The ratio has doubled since 2010.
That compares with total US public and private debt of about 265% of GDP last year, which had fallen significantly from its pandemic-era peak. US interest payments have nevertheless risen by about 390% since 2013, reaching $1 trillion and exceeding the Pentagon’s budget.
The two economies are facing different conditions. The US has benefited from an artificial intelligence boom, continued consumer spending, low unemployment and stock markets close to record highs, although large technology companies are borrowing to finance data centres and chip purchases.
In China, the expanding debt burden is increasingly being seen as a drag on growth rather than a source of fresh momentum. Mark Williams, chief Asia economist at Capital Economics, said the drive to support growth and protect jobs had contributed to government borrowing and loose lending standards among state-owned banks.
“The irony is that one driver of both government borrowing and the lax lending standards of [state-owned] banks is the desire to prop up economic growth and prevent job losses,” he wrote in May. “But the product of a credit boom that has been underway for 18 years is a banking system propping up unproductive firms, widespread losses across industry, and entrenched overcapacity.”
