Reply To: China is Capitalist
Local government debt is a “big headache” for the national economy.
Having spent more than £42bn last year on Covid-prevention measures, and hit by falling tax revenues, by December 2022 local governments had accumulated 35tn yuan (£4.2tn) in debt, up from 30.5tn yuan the previous year. That means that China’s provincial debt burden is roughly 20% bigger than Germany’s total GDP.
Local governments owe billions: last year 2.6tn yuan of refinancing bonds were issued, and more than 1tn yuan was paid in interest alone.
Revenue relating to land sales typically accounts for more than 30% of local government income and between 2019 and 2021 the share was about 40%. But last year land sale revenues declined by nearly one-third compared with 2021.
Hidden debts accumulated through local government financing vehicles, mechanisms that are used to fund infrastructure projects, could more than double the total debt burden.