Beijing pledges to tackle local government debt amid economic struggles
Date
7/24/2024 7:34:49 AM
(MENAFN) Following a pivotal meeting, Beijing has pledged to address the pressing issue of local government debt, although few new policies were unveiled at the conclusion of the session on Thursday. Officials emphasized the need to mitigate economic risks in the world's second-largest economy, which is currently grappling with several challenges including a property debt crisis, declining consumption, and an aging population. The central government has acknowledged that local governments across China are burdened with a substantial debt load amounting to USD5.6 trillion, raising concerns about broader economic stability.
In efforts to reassure the public and international observers, Beijing convened a press conference on Friday featuring a lineup of officials. Han Wenxiu, responsible for financial and economic policy planning, outlined proposals to address the financial difficulties faced by local governments and basic organizations. He highlighted plans to refine the financial relationship between central and local authorities, with a focus on expanding local tax revenues and imposing stricter regulations on expenditure.
Despite the absence of specific details, Han underscored the government's commitment to fiscal discipline and regulatory compliance. This initiative comes amid heightened scrutiny from rating agencies like Fitch, which recently downgraded China's sovereign credit outlook due to concerns over escalating government debt levels projected to reach 61.3 percent of the country's GDP this year.
Addressing another critical issue, Han addressed the challenges in China's property market, historically a cornerstone of national economic growth. He acknowledged the sector's current struggles with mounting debt, particularly among leading firms, but pointed to recent "positive changes" in the real estate market. Han emphasized the government's intention to move away from the previous high-debt model, aiming to stabilize the sector and ensure sustainable growth.
Recent economic data has reflected the broader challenges facing China, with official statistics revealing a modest 4.7 percent growth in the second quarter of the year. This subdued growth rate underscores the complexities and uncertainties that Beijing must navigate as it seeks to stabilize the economy, manage debt levels, and sustain growth amidst global economic pressures.
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