On October 28, China’s Ministry of Finance issued the first of a series of directives on handing outstanding local government debt.
According to the directive issued, local government debt outstanding as of December 31 must be categorized so that appropriate authorities will be assigned to take responsibility. The effort is meant to identify local debts with the ultimate goal being to include all government debts into budgets. Some debts may be converted into corporate debts through public-private partnerships (PPP).
Analysts observed that the issuance of the directive indicated that China has entered the peak of debt repayments and many local governments face pressure to repay large debts that are due. The PPP model that the directive promotes, in fact, will allow the use of private funds to lessen the enormous pressure on local governments.
Source: Economic Information Daily reprinted by People’s Daily, October 29, 2014