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China’s Local Governments Are Deep in Debt

China Review News reported that the level of debt that China’s local governments have reached is unsustainably high. According to the China’s National Audit Office, by June 2013, local governments had 10.88 trillion yuan (US$1.78 trillion) in debt obligations, 2.66 trillion yuan (US$429 billion) in debt for which they have provided guarantees, and 4.34 trillion yuan (US$711 billion) in debt for which they bear certain bailout responsibilities. The total is close to 18 trillion yuan (US$3 trillion).

The peak period of the debt payback, which is from 2014 to 2017, is close at hand. However, so far, local governments have put up a total of 320 billion yuan (US$52 billion) as the reserve to pay off the debt.

Facing the mounting pressure of a local debt crisis, in an attempt to resolve this problem, the State Council approved ten local governments to issue local bonds. The ten governments include Shanghai, Zhejiang Province, Ningxia Hui Autonomous Region, and Qingdao City in Shandong Province.

Source: China Review News, May 26, 2014