In a recent State Council meeting, Chinese Premier Li Qiang emphasized robust measures to mitigate local government debt risks, aligning with the nation’s high-quality development goals. The meeting highlighted the importance of strong policy support and effective debt management strategies.
According to the Ministry of Finance, local government debt reached 40.74 trillion yuan ($5.82 trillion) by the end of 2023, remaining within the limits approved by the National People's Congress. This suggests that debt risks are currently manageable and under control.
A commentary by Economic Daily pointed out that China's government debt is predominantly domestic. Coupled with economic and social stability, strict regulation of new debt, and a gradual reduction of existing debt, China is positioned to effectively and systematically de-leverage.
Last July, the Political Bureau of the Communist Party of China Central Committee initiated a comprehensive debt resolution strategy. This led to over 20 provinces issuing approximately 1.4 trillion yuan in special refinancing bonds to ease repayment pressures and reduce interest burdens, as reported by China Business Network.
Supported by the People’s Bank of China, financial institutions have engaged in constructive negotiations to restructure existing debts through measures such as debt rollovers and new loans replacing old ones.
Luo Zhiheng, chief economist at Yuekai Securities, emphasized that effective debt management goes beyond merely reducing debt levels. He stated that with prudent and efficient use, an increasing debt load can positively contribute to economic and social development. \"The overall growth of the economy can outstrip the increase in debt, thereby reducing debt risks amid high-quality development,\" Luo told China Business Network.
Reference(s):
cgtn.com
