China Approves $840 Billion Plan To Refinance Local Government Debt

China approved a 6 trillion yuan ($839 billion) plan on Friday to help local governments refinance their massive debt, in the latest push to stimulate growth in the world’s second-largest economy, Ken Moritsugu and Zen Soo reported, for the Associated Press (AP).

The plan will be implemented over the next three years. I Photo: 中国新闻社 Wikimedia Commons

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, announced at a news conference.

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 publicly disclosed.

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Lan said 2 trillion yuan would be allocated annually from 2024 to 2026 to help local governments manage their debts. He projected that hidden debt would drop to 2.3 trillion yuan ($320.9 billion) by the end of 2028.

Officials also announced that the cap for issuing special bonds would increase to 35.52 trillion yuan ($4.96 billion) from 29.52 trillion yuan ($4.12 billion) for local governments.

Lan noted that this large-scale restructuring marks a “fundamental shift” in China’s approach to debt management, adding that the country’s government debt risk was “controllable.”