China Tells Banks to Extend Local Government Debt to Ease Risks

China has told state-owned banks to roll over existing local government debt with longer-term loans at lower interest rates to reduce risks.

Local government debt reached 92 trillion yuan in 2022, up from 62% of GDP in 2019, partly due to infrastructure spending.

Loans originally due by 2024 will not be considered non-performing if extended, to help banks.

Interest rates on rolled-over loans should not fall below Treasury bond rates of 2.7%.

The PBOC will help high-risk regions by letting banks issue new loans to repay old debt.