China Approves $840Bn Plan To Refinance Local Government Debt, Boost Slowing Economy
Date
11/11/2024 4:40:30 AM
(MENAFN- The Peninsula)
AP
Beijing: China on Friday approved a 6 trillion yuan ($839bn) plan to help local governments refinance their mountains of debt, in the latest push to rev up growth in the world's second largest economy.
The plan will be implemented over the next three years, Xu Hongcai, vice-chairman of the National People's Congress's financial and economic committee, said at a news conference Friday.
Finance Minister Lan Fo'an estimated that the hidden debt of local governments was 14.3 trillion yuan ($2 trillion) at the end of 2023. Hidden debt refers to debt that has not been disclosed publicly.
Lan said 2 trillion yuan would be allocated each year from 2024 to 2026 to help local governments resolve their debts. He estimated that the amount of hidden debt will drop to 2.3 trillion yuan ($320.9bn) by the end of 2028.
Officials also said Friday that the ceiling to issue special bonds will be raised to 35.52 trillion yuan ($4.96 billion) from 29.52 trillion yuan ($4.12bn) for local governments.
Lan said that the implementation of such a large-scale replacement measure indicates a“fundamental shift” in China's approach to debt restructuring and said that China's government debt risk was“controllable.”
Analysts have called for bold, multi-trillion-yuan measures to reinvigorate the world's second largest economy, which has yet to bounce back fully from the COVID-19 pandemic.
Local government debts have ballooned partly due to high spending and low tax revenues during the pandemic, but also due to a downturn in the property industry, since sales of land use rights, a key source of local government revenue, have sagged.
The central bank loosened restrictions on borrowing in late September, sparking a stock market rally, but economists say the government needs to do more to ignite a sustained recovery.
Government officials have indicated that could come at this week's meeting of the Standing Committee of the National People's Congress, which must give official approval to any new spending.
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