Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The Chinese government has prioritized fiscal expansion and local government debt resolution to counteract growth headwinds and manage financial risks [3][4] - China's Augmented Government Debt (AGD) is projected to reach RMB179 trillion in 2024, equivalent to 133% of GDP, with a stable annualized growth rate of around 9% from 2022 to 2024 [5][6] - The average financing costs of AGD are expected to decline from 3.7% in 2024 to 3.4% in 2025, with interest payments stabilizing at RMB6.1 trillion in 2025, which is 4.4% of GDP [21][22] - The AGD-to-GDP ratio is projected to increase steadily, potentially reaching around 170% by 2035, barring any financial crises or aggressive policy-led deleveraging [28][31] Summary by Sections Augmented Government Debt (AGD) Overview - China's AGD has risen significantly, from RMB112 trillion (111% of GDP) in 2019 to RMB179 trillion (133% of GDP) in 2024, marking a 60% increase [5][6] - The growth of AGD has been stable, with official government debt expansion outpacing implicit debt since 2015 [6][10] Financing Costs and Interest Payments - The average financing costs of AGD are projected to decrease, with interest payments expected to stabilize at RMB6.1 trillion in 2025 [21][22] - The ongoing local government debt resolution has helped lower implicit debt servicing costs, particularly in less developed regions [15][21] Future Projections - The report anticipates that the AGD-to-GDP ratio will continue to rise, with nominal GDP growth expected to gradually normalize [27][28] - The report suggests that the current combination of policy efforts should remain in place, while long-term fiscal and tax reforms are necessary for sustainable debt management [39][40]