Fiscal Sustainability and Human Capital Trade-Off in China: A Conceptual Analysis under Economic Slowdown

China’s rising public debt and recent economic slowdown have raised concerns about long-term fiscal sustainability and human capital development. This paper develops a simple conceptual framework to explain how public debt influences human capital investment in China. It argues that increasing debt reduces fiscal space, which may limit government spending on education, healthcare, and innovation. However, the relationship is not uniform and varies depending on economic conditions. During economic slowdown periods, the negative impact of public debt on human capital is stronger due to fiscal pressure and reduced revenues. In contrast, during stable or expansionary periods, the effect is weaker. The paper also highlights that human capital is essential for long-term fiscal sustainability because it enhances productivity and economic growth. This study contributes to understanding the trade-off between fiscal discipline and human capital investment in China and provides policy implications for sustainable development.

public debt, human capital, fiscal sustainability, China, economic slowdown

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