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Chinese Local Government Debts Crisis Continues

Local governments in China are grappling with significant financial pressure and are implementing measures to increase revenue and expedite debt collection.

In late May, the city government of Wuhan in Hubei Province issued a debt collection notice, demanding repayment of over 100 million yuan (US$14 million) in debt from 259 debtors, including state-owned enterprises and lower-level fiscal authorities in Wuhan. Around the same time, Kunming in Yunnan Province also reported debt problems with the city’s platform for financing infrastructure projects, which has 27.31 billion yuan (US$3.8 billion) of bonds maturing before the end of this year.

Furthermore, county-level governments in central and western China are actively auctioning off parking lot operating rights many years into the future so that they can get a large one-time payment now (at the cost of not receiving parking income in subsequent years). Companies that win the parking operator’s rights might impose higher parking fees to recoup costs and make money. Nanning City, Guangxi Zhuang Autonomous Region, is under public scrutiny for high parking fees.

Official data reveals that, as of the end of 2022, the balance of local government debt in China stood at approximately 35.07 trillion yuan (US$4.9 trillion).

He Qinglian, an economist living in exile in the United States, recently told Radio Free Asia that the financial strain at the local level could directly impact China’s moderate 5% economic growth target for this year. Local governments that are unable to repay their debts will face potential collapse of local financing platforms and credit defaults.

Source: Central News Agency (Taiwan), June 5, 2023