A rare public warning is rippling through China’s economic policy circles. Liu Xiaoshu, one of the country’s most visible economists, says the current path on debt is risky and short-sighted. His message is blunt. Pumping the economy with short-term fixes to chase long-term growth can end badly.

Liu is not an outsider tossing stones. He runs the China Chief Economist Forum and serves as chief economist at Bank of Qingdao. When someone like that speaks up, people listen. His recent essay, titled “The short-term sum is not equal to long-term gains,” landed right as Beijing prepares for a record-high deficit ratio of 4% in 2025.

This is not a lonely cry of doom. It is part of a live, heated debate inside China. On one side sit the so-called deficit doves, who argue that more borrowing and spending can steady growth. On the other side stands Liu, warning that too much stimulus today can plant the seeds of a debt crisis tomorrow.

Why Liu Thinks Constant Stimulus Warps the Economy?

Nick  / Pexels / Liu’s first concern hits at the core of how the economy works. He says nonstop government support bends market signals out of shape.

When cheap money and policy backing never stop, bad businesses do not fail. They linger.

These so-called zombie companies drain capital and talent. They crowd out firms that could grow, hire, and innovate. Over time, productivity sinks. Growth looks stable on paper, but the engine weakens underneath.

He also warns about a wealth illusion. Easy credit can make households feel richer than they are. People spend more and borrow more, expecting good times to last. When stimulus slows or stops, that confidence can crack fast.

The Bigger Fear, Debt That Refuses to Stop Growing

Liu’s sharper warning targets government debt itself. Borrowing adds up, even when growth looks fine. Each new round of stimulus raises future interest costs.

Those costs do not vanish. They compete with spending on healthcare, education, and social support. Over time, debt service can squeeze the very programs meant to keep society stable.

Liu warns about confidence. If investors start to doubt the government’s ability to manage debt, financing costs can jump. Higher rates mean higher debt burdens. That loop can feed on itself.

To make his case, Liu points to history. Japan’s long stagnation after its asset bubble burst shows how debt-fueled support can trap an economy. Europe’s sovereign debt crisis shows how fast confidence can vanish once debt looks out of control.

His message is clear. Debt problems rarely explode overnight. They build slowly, then hit hard.

A Push for Long-Term Fixes, Not Quick Wins

Let / Unsplash / Instead of more stimulus, Liu calls for deeper reform. He wants policies that grow the economy from within. That means stronger private businesses, better workers, and smarter investment.

He argues for lower corporate taxes to free up cash for expansion. He calls for simpler rules so firms can move faster and take risks. Plus, he also pushes for more spending on research and development, where long-term gains often start.

Education matters too. Liu stresses vocational training and skills upgrades. A stronger workforce boosts productivity without piling on debt. Growth earned this way lasts longer and costs less in the end.

These ideas are not flashy. They do not promise instant results. Liu says that is the point. Real growth takes time, patience, and discipline.