Xinhua reported that, by the end of the first quarter of this year, China’s Micro Leverage Ratio increased by 5.1 percent over last year, reaching 248.8 percent. The record that this set establishes a new high. The Micro Leverage Ratio is defined as the total government debt over the GDP.
This reason for the new high ratio is the slowdown of the increase in fiscal income. On the one hand, the fiscal income increase ratio went down to 2.9 percent in April, the lowest since 2016. On the other hand, government spending is increasing at a faster rate. The actual deficit ratio, defined as (general public fiscal spending minus general public fiscal income), when divided by GDP, has increased to 4.5 percent, the highest in the past ten years.
Therefore, local governments have resorted to issuing bonds to raise money thus hiking up the debt ratio.
Source: Xinhua, June 14, 2019