China's debt-servicing payments will account for 19.2% of the central government’s general public budget this year, up from 12% in 2014, according to Conference Board estimates cited by the Financial Times.
A separate report from the Center for Strategic and International Studies found that 19% of Beijing’s spending is earmarked for interest on debt. That is above the 14% of the U.S. federal budget that goes to interest costs, though below Japan’s 25.6%.
CSIS said China’s spending on interest payments jumped 341% between 2013 and 2025, faster than any other major budget category. Over the same period, total spending rose 102%, social security and employment outlays rose 207%, science and technology spending rose 137%, and defense spending rose 141%.
U.S. debt-interest spending has also surged, rising about 390% since 2013 to $1 trillion, a sum that tops the Pentagon’s budget.
The broader backdrop is a split between the world's two biggest economies. The U.S. economy is accelerating, helped by the AI boom, while resilient consumers continue to spend. Unemployment is low, stock markets are near record highs, and hyperscalers are issuing bonds, fresh stock offerings and IPOs to fund data centers and chip purchases.
China, by contrast, is slowing. Its GDP has been decelerating and is on pace to undercut its annual target of 4.5%-5%. Export-facing sectors are still growing quickly, but trade partners are putting up barriers, Chinese consumers remain reluctant to spend, investment is weak, the property sector is still recovering from an epic crash, and Chinese stocks have been anemic.
Beijing has steered state banks to finance priority industries such as electric vehicles, robotics, artificial intelligence and renewable energy. But under pressure to lend, many loans went to questionable borrowers. Business debt has doubled since 2019, while revenues are only 30% higher. Creditors continue to roll over loans to keep struggling firms afloat, even as nearly a third of them are losing money.
The International Monetary Fund said China’s general government gross debt hit 107% of GDP this year, up from 41% in 2015 and on a path to reach 124% in 2030. Capital Economics estimated that China’s total debt-to-GDP ratio, excluding the financial sector, has topped 300%, while U.S. total public and private debt last year was about 265% of GDP.
Mark Williams, chief Asia economist at Capital Economics, wrote in May that the desire to prop up growth and prevent job losses is helping drive government borrowing and lax lending standards at state-owned banks. He said the result is a banking system propping up unproductive firms, widespread losses across industry, and entrenched overcapacity.
For Washington, the lesson is familiar: cheap credit and state direction may buy time, but they do not repeal arithmetic. When debt service grows faster than the economy, capital gets trapped in the wrong places and the taxpayer ultimately pays for the delay.
