On 19 March 2026, CSPI Ratings invited Morgan Stanley Asia to speak in the “2026 Credit Outlook - China Public Finance” webinar. The webinar was conducted in English and attracted 130 market participants from 17 countries and/or regions. Mr. Jameson Zuo, Director of Ratings at CSPI Ratings and Mr. Richard Xu, Chief China Financial Analyst and Managing Director at Morgan Stanley Asia took the form of a fireside chat. They discussed China’s macroeconomic trend and public finance topics, including  GDP growth target, fiscal shift, debt overhang and LGFV offshore bond credit risk and outlook.

Regarding the 2026 outlook, both Jameson and Richard agreed that China's macroeconomy will remain robust. The official 2026 GDP growth target is set at 4.5–5.0%, meanwhile CSPI Ratings’ projection is 4.8%. Jameson highlighted that price deflationary pressure since 2023 has materially eased, given that PPI declines have narrowed and core CPI has stabilized. This has been driven by rapid and structural demand growth in sectors such as artificial intelligence and electronics and by the gradual effect of the continued "anti-involution" policies. He emphasized consumption as the primary growth engine. He also noted that China has been optimizing its export market structure with ASEAN becoming its largest trading partner. He observed early signs of fixed-asset investment recovery led by growing infrastructure projects after the property downturn. Richard agreed with Jameson. He believed that industrial upgrading and rising export competitiveness have effectively buffered the drag from the property downturn, supporting macro resilience.

Regarding China's public debt and leverage, Jameson estimated public debt at about 68% of GDP at end-2025, rising toward 75% in 2026. It will be still materially below most advanced economies, hence leaving room for further leverage. He noted significant progress in large-scale debt-swap efforts. "Replacing high-cost, short-term implicit liabilities with low-cost, long-dated explicit debt" has materially eased liquidity pressures for LGFVs and local finances. The current CNY 10 trillion debt-swap program can effectively control contingent liability risks. Richard added that investors should look beyond debt/GDP ratios to the government’s net interest burden and asset return capacity. He highlighted China’s very large government asset base, which generates stable cash flows and keeps the current interest burden within a manageable range compared with the rest of the world.

On LGFV credit risk and outlook, Jameson observed that the onshore bond market has benefited from debt swaps and the “reduce existing volume and curb new growth” policy mix. Yield spread dispersion has tightened, tail risks have declined substantially, and investor confidence has improved. By contrast, the offshore market contracted sharply in 2025, with new issuance amounts below matured amounts, driven by high US dollar funding costs and regulatory factors. Jameson noted the rise of guarantee-backed issuance but he expressed concerns about the high offshore issuance interest rate. Guarantors’ credit has not been well-recognized in the offshore market. The information asymmetry between the onshore and offshore markets and the legal uncertainty in cross-border enforcement, may result in a high offshore risk premium. Richard agreed that aggregate LGFV risk has fallen significantly but cautioned that structural mismatches across regions and projects and persistent information gaps remain. These require the coordination between the central and local governments in prioritizing repayment of critical obligations.

The webinar featured active audience engagement and lively online discussion. Responding to an audience's question - why China’s macro leverage rises roughly 10% annually while the GDP multiplier appears low, Richard characterized this as primarily a short-term phenomenon linked to the prolonged adjustment in real estate plus structural economic transition, which necessitates some leverage for buffering. He said credit allocation is improving and the government is reallocating and optimizing substantial state-owned assets (about CNY 430 trillion) to better support households and total-factor productivity. Jameson agreed and added that as transformational investments (new infrastructure such as computing capacity, power facilities, and ultra-high-voltage grids) advance, policy spending efficiency should rise, strengthening the growth multiplier and slowing debt growth.

The webinar generated strong interaction and broad resonance with participants, reflecting international investors’ high attention to China’s public-finance resilience, economic transition pathway, and credit-market evolution.

Application for CPT Certificate
Participants who attended the full webinar are eligible for one CPT hour of Hong Kong Securities and Futures Commission (HKSFC). Please email your request to events@cspi-ratings.com if needed.

Related Links
CSPI Ratings is now offering free access to the webinar replay. Register to watch by scanning the QR code below OR by visiting here.

Related Readings
Non-rating Action Commentary: China’s Economic Growth and Fiscal Policy Optimisation under a Flexible Growth Target
China’s Public Finance Credit Outlook for 2026
Announcement: CSPI Ratings Receives the Asset's “Public Finance Rating Agency of the Year 2026”

About CSPI

CSPI Ratings (Full name: CSPI Credit Rating Company Limited) is a leading global credit rating agency headquartered in Hong Kong. Licensed by the Hong Kong Securities and Futures Commission (SFC) since 2012, we provide world-class credit insights, combining global benchmarks with an emerging market perspective.

In 2025, CSPI Ratings was recognized by the Mandatory Provident Fund Schemes Authority (MPFA) as an "Approved Credit Rating Agency," joining Hong Kong’s MPF regulatory framework. As of the end of 2025, MPF total assets reached over HKD 1.5 trillion.

CSPI Ratings’ analytical excellence is widely recognized, having been honored with DMI's "Internationalization Award for a Chinese Rating Agency" for two consecutive years (2025-26). Additionally, we were recognized as "Public Finance Rating Agency of the Year – China" by The Asset from 2022 to 2026, achieving this accolade for five consecutive years. Furthermore, we received the "2025 Internationalization Award for Chinese Credit Rating Agencies" from the China (Macao) Financial Assets Exchange (MOX).

As a member of China Securities Credit Investment Group, CSPI Ratings leverages a strong network of 34 leading Chinese financial institutions. As the international brand of CSCI Pengyuan, we bridge global investors with trusted credit insights.

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