China increases debt ceiling, launches debt swap program

The Chinese government has raised the local government’s debt ceiling to CNY 35.52 trillion and introduced a CNY 10 trillion program to help local governments swap off-balance sheet debt with Beijing, securing more affordable financing for public spending.

China increases debt ceiling, launches debt swap program

The Finance Ministry estimates these measures will save local governments CNY 600 billion in interest payments over the next five years. Local government debt stood at CNY 14.3 trillion in 2023, and the initiative aims to reduce this to CNY 2.3 trillion by 2028. Additionally, the increased debt ceiling will provide more room for local governments to spend, especially as land sales—a key revenue source—have stalled amid China's economic challenges.

China’s debt measures exclude new fiscal stimulus

However, the measures did not include new fiscal stimulus targeting consumption, which some market participants had expected after the National People's Congress Standing Committee.