Amid global environmental challenges, China has called for advancing the resolution of local government debt and strengthening local governments’ independent repayment capacities.
According to CCTV News, on Saturday (May 9), Chinese Premier Li Qiang chaired a State Council executive meeting to discuss advancing efforts to mitigate local government debt risks.
The authorities stated that since the implementation of the package of debt-resolution policies, significant progress has been made in resolving debt risks. Continued focus will be placed on key and vulnerable areas, improving supportive debt-resolution policies, bolstering the capacity of local authorities to repay independently, and ensuring debt resolution tasks are completed on schedule.
The meeting also called for establishing and improving long-term mechanisms, and firmly preventing the creation of new hidden debts.
The meeting also called for establishing and improving long-term mechanisms, and firmly preventing the creation of new hidden debts.
Local government debt has been one of the economic and financial risks closely monitored in China in recent years. Authorities have adopted multiple measures to mitigate these risks, including the introduction of a debt-resolution package worth 10 trillion yuan (RMB; 5 trillion ringgit) in November 2024. From 2024 to 2026, an annual debt limit of 2 trillion yuan will be allocated to swap out existing hidden local government debt; and from 2024 to 2028, an annual allocation of 800 billion yuan from new local government special-purpose bonds will be set aside specifically for debt resolution.
This “combination punch” of debt resolution measures aims to lighten the heavy debt burden of local governments. Data show that as of the end of February, the outstanding balance of Chinese local government debt was about 56.6 trillion yuan.
This “combination punch” of debt resolution measures aims to lighten the heavy debt burden of local governments. Data show that as of the end of February, the outstanding balance of Chinese local government debt was about 56.6 trillion yuan.
In the first quarter of this year, the scale of Chinese local government bond issuance reached a record high, up about 9.3% year-on-year, with over half being refinancing bonds, mainly used for “borrowing new to repay old,” thus relieving current repayment pressures.