The IMF has urged Beijing to spend more as growth is expected to slow to 4.5% this year and 4% in 2027, while augmented government debt reached about 126.6% of GDP last year. The pressure is mostly at local level, where land-sale income has more than halved since 2021 to 4.2 trillion yuan (about $590 billion), and combined fiscal spending fell 3.5% in the first eight months of the year. Nomura's Ting Lu calls this a 'true fiscal cliff', with urban fixed-asset investment down 7.2% in the first three quarters after a 3.8% fall last year. Beijing kept its official deficit target at about 4% of GDP, while the Institute of International Finance estimates the actual deficit could reach 9%. Hidden debt in local government financing vehicles fell to 6.5 trillion yuan last year from 14.3 trillion yuan in 2023, but many still lack cash flow to pay interest.
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