China Plans to Boost Spending, Tackle Debt Risks in 2026

(Bloomberg) — China said it will expand government spending and improve how it deploys capital in 2026, aiming to balance supporting growth and containing debt risks.

Beijing plans to boost expenditure and strengthen the spending power of local authorities through more effective transfer payments, the Ministry of finance said in a sunday statement. The announcement, following a year-end policy meeting, suggests a focus on better coordination between fiscal and financial tools rather than more forceful stimulus measures.

“More proactive fiscal policy will be reflected not only in the scale of funding, but more importantly in improving the efficiency and effectiveness of how funds are used,” Finance Minister Lan Fo’an was quoted by the official Xinhua News Agency as saying in a report.

The move highlights the fine line Beijing is walking between buffering the economy against external headwinds and preventing a domestic debt crisis from destabilizing the financial system.

Lan vowed to accelerate efforts to resolve risks associated with local “hidden debt” – off-balance-sheet borrowing by investment vehicles on behalf of cities and provinces that they have struggled to repay.