China reviews plan to increase local government debt

Published On Nov 4, 2024, 7:49 PM

China's National People's Congress is reviewing a proposal to raise the local government debt limit, primarily to replace existing hidden debt which is estimated at around 50 trillion to 60 trillion yuan. The move is expected to support local authorities, who have seen financial challenges due to declining land sale revenues. Finance Minister Lan Fo'an indicated that around 10 trillion yuan in additional debt could be approved to help address these issues, possibly increasing to 15 trillion if economic conditions deteriorate further.

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The increase in local government debt could be seen as a positive signal to markets, indicating China's commitment to support economic growth through fiscal measures. However, concerns about rising debt levels could weigh on investor sentiment over the longer term.

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