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Local Government Debts Reached a New High; Half of New Debts Are to Pay Off Old Debts

China’s debts have continued to soar, with the latest official figures showing that local government debts surged in the first 10 months of the year, reaching a record high of 30 trillion yuan (US$ 4.7 trillion). A more concerning phenomenon is that nearly half of the new debts were not injected into the economy but were used to pay off old debts.

On Tuesday November 23, China’s Ministry of Finance released the latest data on local government bond issuance. From January to October this year, China issued a total of 6.49 trillion yuan (US$ 1.0 trillion) in local government bonds, up 6 percent from the same period last year and hitting a record high. Among them, 2.8 trillion yuan (US$ 0.44 trillion) was issued to refinance bonds, an increase of 75 percent compared to the same period last year. In other words, the increase in local bond issuance this year is mainly due to the issuance of refinancing bonds.

In addition, as of the end of October this year, the balance of local government debt was about 29.7 trillion yuan (US$ 4.7 trillion). From January to October this year, Guangdong surpassed all other provincial governments in bond issuance. The total amount issued was 589.4 billion yuan (US$ 92.2 billion).

Source: Radio Free Asia, November 23, 2021