Prominent economists in Beijing have called on the Chinese government to increase central government borrowing and accelerate local debt restructuring to leverage the country's relatively low price levels and stimulate economic demand. The appeal was made during the Tsinghua PBCSF Chief Economists Forum held on Saturday in Beijing.

Yu Yongding, a former member of the People’s Bank of China’s Monetary Policy Committee and current academician at the Chinese Academy of Social Sciences, emphasized that China currently benefits from the lowest price levels globally amid rising oil shocks and widespread inflationary pressures elsewhere. He described this as a rare opportunity for China to adopt more expansionary fiscal and monetary policies. “Once it is gone, it will not come back,” Yu said, warning that a rise in inflation would make such policies more challenging to implement in the future. He suggested that additional government borrowing could be directed at infrastructure investment, a sector that traditionally drives growth and eventually boosts consumption.

Li Xunlei, chief economist at Zhongtai Financial International, agreed that China has capacity to expand government debt without triggering significant inflation. He advocated for increased borrowing at the central government level rather than by local authorities, given the heavy debt burdens already carried by local governments. “As Chinese households have only just begun to deleverage and local governments are already carrying high levels of debt, the central government is the only sector with room to increase leverage,” Li said. He also pointed to past inefficiencies in local government borrowing, noting that investment returns have often been insufficient.

Local government debt remains a major economic concern in China. At the end of 2023, authorities revealed 14.3 trillion yuan (approximately US$2.14 trillion) in hidden local government debt and set targets to resolve these liabilities by 2028. Debt-swap programs supported by special bonds have already reduced the outstanding amount to 6.5 trillion yuan by the end of 2025. Li underscored the need to further reduce financing costs and debt pressures on local governments through accelerated debt restructuring. However, he noted that the effectiveness of special bonds has diminished in recent years due to stringent project requirements, which have limited local officials' ability to identify eligible investment opportunities. This constraint has been mirrored in weaker-than-expected investment growth. According to data from the National Bureau of Statistics, overall fixed-asset investment—which includes infrastructure, manufacturing, and property construction—dropped 7.2 percent year-on-year in the first eight months of 2026, an acceleration from a 6.7 percent decline recorded in the first seven months.

At the same forum, Lin Yifu, an economics professor at Peking University and former World Bank chief economist, called for clearer distinctions regarding responsibility for local government debt. He argued that debt incurred for projects mainly serving local government interests, such as image-building efforts, should remain the responsibility of local authorities. Conversely, debt related to central government policy initiatives should be assumed by the central government. Lin suggested this approach would alleviate the burden on local governments and allow them to proceed with less financial pressure.

The economists’ comments reflect ongoing concerns about China’s economic growth prospects amid slowing investment and rising global inflation, highlighting the challenges the government faces in balancing fiscal support with financial stability.