Quick access to main page (top) Direct access to main contents Quick access to main page (bottom)

China’s Local Government Debt Hits Record High: Will It Lead to Default?

Eugene Park Views  

A construction site for a mega bridge for the Xi’an-Yanan high-speed railway is under construction in Yanan City, Shaanxi Province, northwest China. Xinhua News

It was revealed that the scale of new debt taken out by Chinese local governments to repay maturing debt last year recorded the largest. Last year, local government debt increased by more than 10% compared to the previous year, and it is estimated that a huge amount of hidden debt is not caught in official statistics. Some are pointing out a high risk of defaulting without central government support.

The China Business News & Network reported on the 31st that the total amount of local government borrowing last year was 9.3394 trillion yuan, citing 2023 Local Bond Issuance and Debt statistics released by the Chinese Ministry of Finance the day before. This is an increase of 2 trillion yuan from the previous year, and the amount of refinancing issued for debt repayment, which exceeds 50% of the total, was 4.6803 trillion yuan. This is the highest level ever and more than the bonds issued for financial expansion or infrastructure construction (4.6591 trillion yuan).

The Chinese Ministry of Finance explained that the scale of refunding bonds last year was unusually large and that local government spending was much larger than revenue. This happened all at once when local governments could not recover their principal due to excessive investment in inefficient areas. Last year, the issuance of new local bonds decreased by 2% compared to the previous year, but the issuance of refinancing bonds surged by 79%.

Local governments issued many bonds for refinancing purposes, so the central government allowed some regions to issue 1.4 trillion yuan in special refinancing bonds. The provinces of Hunan, Anhui, Guizhou, Yunnan, Tianjin, and Guangxi Zhuang Autonomous Region had a large allocation of special refinancing bonds.

Pedestrians pass by a construction site in the central business district of Beijing, China. AP

Local government debt was 40.74 trillion yuan. Although it is lower than the target limit of 42.17 trillion yuan set at the beginning of the year, the increase of 5.68 trillion yuan exceeded the target limit by 1 trillion yuan. It is pointed out that the direct cause is the problem of local government financing vehicle (LGFV) debt, which has surged to an unmanageable level. It is related to the central government taking measures such as issuing special bonds to solve the LGFV debt problem.

The Wall Street Journal (WSJ) estimated that “hidden debt” in China, including LGFV debt, which is not caught in official statistics, reaches $7 trillion to $11 trillion. In particular, it is evaluated that local governments have reached a level that their repayment ability cannot handle as they raise funds by issuing bonds using LGFV. In this situation, the Chinese Communist Party and the central government have ordered the ban of new projects such as local highways, private airport reconstruction and expansion, urban railways, and museum construction in high-debt risk areas such as Tianjin, Chongqing, Liaoning, Jilin, Heilongjiang, Guizhou, Yunnan, Gansu, Qinghai, Inner Mongolia, Ningxia, and Guangxi Zhuang Autonomous Region. It is known that special bond issuance will be allowed to local governments if necessary this year.

Eugene Park
content@www.kangnamtimes.com

Comments0

300

Comments0

[ASIA] Latest Stories

  • From Perfect Scorer to Perfect Criminal: The Shocking Gangnam Murder
  • Parole Decision for President's Mother-in-Law: Politics or Justice?
  • North Korea's Immoral Pension Plan Amounts to Less Than $1
  • North Koreans Paying Up to $85,000 to Defect the Country
  • South Korea Exposes North Korea's Human Rights Abuses
  • North Korea Indirectly Warns the U.S. With Nuclear Retaliation Simulation

Weekly Best Articles

  • California Police Frustrated by Tesla Model 3: Too Cramped, Not Practical
  • Trump vs. Harris: Which U.S. Election Outcome Will Boost Stocks the Most?
  • Kim Sejeong on Kiss Scene Prep: ‘It’s Like Laying the Foundation for a Building!’
  • Kim Tae Ri’s Character Faces Devastating Setback in ‘Jeongnyeon: The Star is Born’
  • Lee Seung Gi Goes Bald! Shocking Change for His Role in ‘About Family’
  • Man Who Sponsored $1.2M to Streamer Juice Se Yeon Says She Blocked Him After Scandals
  • BTS Music Video Star and Tattoo Model Kim Woo Young Remembered 6 Years Later
  • Outback’s Last Ride: Subaru Launches 30th Anniversary Edition with Exclusive Features
  • Chrysler’s 2025 SUV: A Glimpse into the Future of Electric Vehicles
  • Fiat’s ‘Ugliest Car’ Makes a Comeback with Hyundai’s Pixel Design Twist
  • THIS is the Country Jensen Huang Thinks Will Lead the AI Revolution
  • Volkswagen Shutting Down German Plant for the First Time Ever—Big Layoffs Expected

You May Also Like

  • 1
    Kim Nam Gil Spills Secrets About The Fiery Priest 2—Why Fans Should Be Excited

    ENTERTAINMENT 

  • 2
    Google's Tax Tricks: How They Pay Pennies on Billions in Korean Revenue

    BUSINESS 

  • 3
    BJ Juice Se Yeon Deletes ‘Suspicious’ Photo with Kim Haon—Fans Speculate Romance

    ENTERTAINMENT 

  • 4
    G-Dragon’s Secret Addiction? The K-pop Star Can’t Stop Watching Dating Shows

    ENTERTAINMENT 

  • 5
    Chef Triple Star Shows Up at Event Despite Explosive Cheating and Embezzlement Claims

    ENTERTAINMENT 

Popular Now

  • 1
    Jaehyun Joins the Military—Here’s What Happens to His Career While He’s Away

    ENTERTAINMENT 

  • 2
    BMW M3 to Feature 600 HP Mild Hybrid Powertrain—No Plug-in Hybrid Here!

    TECH 

  • 3
    Subaru BRZ Purple Edition: Only 500 Units Available in North America for $35,445

    TECH 

  • 4
    Brazil’s Beloved Nivus Gets a Facelift: New GTS Model Starts at $24,480

    TECH 

  • 5
    Tesla’s Roadster Returns: 621 Miles on One Charge and Insane Speed

    TECH 

Weekly Best Articles

  • California Police Frustrated by Tesla Model 3: Too Cramped, Not Practical
  • Trump vs. Harris: Which U.S. Election Outcome Will Boost Stocks the Most?
  • Kim Sejeong on Kiss Scene Prep: ‘It’s Like Laying the Foundation for a Building!’
  • Kim Tae Ri’s Character Faces Devastating Setback in ‘Jeongnyeon: The Star is Born’
  • Lee Seung Gi Goes Bald! Shocking Change for His Role in ‘About Family’
  • Man Who Sponsored $1.2M to Streamer Juice Se Yeon Says She Blocked Him After Scandals
  • BTS Music Video Star and Tattoo Model Kim Woo Young Remembered 6 Years Later
  • Outback’s Last Ride: Subaru Launches 30th Anniversary Edition with Exclusive Features
  • Chrysler’s 2025 SUV: A Glimpse into the Future of Electric Vehicles
  • Fiat’s ‘Ugliest Car’ Makes a Comeback with Hyundai’s Pixel Design Twist
  • THIS is the Country Jensen Huang Thinks Will Lead the AI Revolution
  • Volkswagen Shutting Down German Plant for the First Time Ever—Big Layoffs Expected

Must-Reads

  • 1
    Kim Nam Gil Spills Secrets About The Fiery Priest 2—Why Fans Should Be Excited

    ENTERTAINMENT 

  • 2
    Google's Tax Tricks: How They Pay Pennies on Billions in Korean Revenue

    BUSINESS 

  • 3
    BJ Juice Se Yeon Deletes ‘Suspicious’ Photo with Kim Haon—Fans Speculate Romance

    ENTERTAINMENT 

  • 4
    G-Dragon’s Secret Addiction? The K-pop Star Can’t Stop Watching Dating Shows

    ENTERTAINMENT 

  • 5
    Chef Triple Star Shows Up at Event Despite Explosive Cheating and Embezzlement Claims

    ENTERTAINMENT 

Popular Now

  • 1
    Jaehyun Joins the Military—Here’s What Happens to His Career While He’s Away

    ENTERTAINMENT 

  • 2
    BMW M3 to Feature 600 HP Mild Hybrid Powertrain—No Plug-in Hybrid Here!

    TECH 

  • 3
    Subaru BRZ Purple Edition: Only 500 Units Available in North America for $35,445

    TECH 

  • 4
    Brazil’s Beloved Nivus Gets a Facelift: New GTS Model Starts at $24,480

    TECH 

  • 5
    Tesla’s Roadster Returns: 621 Miles on One Charge and Insane Speed

    TECH 

Share it on...