China’s local govt faces squeeze | Page 2 | Sunday Observer

China’s local govt faces squeeze

4 December, 2022

Signs are growing in China that local government debt burdens are becoming unsustainable.

China’s 31 provincial governments have a stockpile of outstanding bonds that’s close to the Ministry of Finance’s risk threshold of 120% of income. Breaching that line could mean regions will face more regulatory hurdles to borrow, hampering their ability to drive up economic growth.

Local authorities will also face a massive maturity wall over the next five years as bonds worth almost 15 trillion Yuan (US$2.1 trillion) -- over 40% of their outstanding debt -- fall due.

While there’s little risk of provincial governments defaulting, they will run into increasing difficulty in repaying their debts.

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