China Confident in Managing Local Government Debt Risks, Say Experts
China is taking decisive steps to manage its local government debt, with experts expressing confidence in the country’s ability to mitigate risks and maintain economic stability.
Last Friday, Chinese Premier Li Qiang led a State Council meeting focused on enhancing measures to address local government debt risks. The meeting emphasized the importance of robust policy support and effective debt management strategies aligned with China’s high-quality development goals.
According to data from the Ministry of Finance, China’s total local government debt stood at 40.74 trillion yuan (approximately $5.82 trillion) by the end of 2023. This figure remains within the limits approved by the National People’s Congress, indicating that debt risks are under control.
An editorial published by Economic Daily on Saturday highlighted that China’s government debt is predominantly domestic. The commentary noted that due to the country’s economic and social stability, strict regulation of new debt, and gradual reduction of existing debt, China can effectively and systematically reduce leverage.
In a significant move, the Political Bureau of the Communist Party of China Central Committee initiated a comprehensive debt resolution strategy in July last year. This strategy led over 20 provinces to issue approximately 1.4 trillion yuan in special refinancing bonds, easing repayment pressures and reducing interest burdens, as reported by China Business Network.
Financial institutions, supported by the People’s Bank of China—the country’s central bank—have engaged in constructive negotiations to restructure existing debts. Measures include debt rollovers and issuing new loans to replace old ones, fostering a sustainable financial environment.
Luo Zhiheng, chief economist at Yuekai Securities, emphasized that effective debt management involves more than just reducing the scale of debt. “With prudent and efficient use, an increasing debt load can contribute positively to economic and social development,” Luo told China Business Network.
He added that as China’s economy continues to grow, the expansion can outpace the increase in debt, thereby reducing debt risks amid the nation’s pursuit of high-quality development.
Reference(s):
cgtn.com
