China’s ticking debt dilemma: the longer they wait, the bigger the cost
China's local government debt has reached a record 66 trillion yuan ($9 trillion), prompting Beijing to seek a comprehensive solution to the crisis.
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Posted 8/24/2023, 3:00:08 AM
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China's finance ministry and water resources ministry have provided an additional 500 million yuan ($68.68 million) to aid flood-affected residents in restoring normal production in national flood storage areas.
China is considering providing cheap funding to local government financing vehicles (LGFVs) in an effort to address debt concerns and improve their cashflow amid mounting risks, according to reports, with the central bank potentially setting up an emergency liquidity tool to provide low-cost, longer-term funds. The move comes as authorities also mull plans to cut LGFV debt, including allowing provincial-level governments to raise about 1 trillion yuan through special bonds sales to repay the debt of LGFVs and other off-balance sheet issuers. The measures are part of China's efforts to address the major economic and financial risks posed by LGFV debt.
As China's economic crisis unfolds, it is becoming apparent that the immense debt accumulated in building infrastructure projects, coupled with high unemployment and personal decisions made by Xi Jinping, could pose a serious threat to the regime's stability and potentially lead to a post-Communist China.
The US government's debt has reached a record high of almost $33 trillion, causing concerns about its impact on the nation's finances and the risk of a debt crisis, according to experts like Larry McDonald, Ray Dalio, and Nouriel Roubini.
The U.S.'s national debt has reached nearly $33 trillion and while debt has its uses, concerns are rising about its impact on the economy, particularly as the debt-to-GDP ratio nears 100%.
Local governments in China are facing an urgent liquidity crisis as their deteriorating financial health and mounting debt pose risks of defaults, with doubts about the central government's ability to effectively resolve the situation and concerns over the consequences of curbing local government borrowing.
The US national debt has reached a record high of $33 trillion, prompting the need for leaders to decide whether to raise the debt ceiling, as inflation continues to rise and there is a looming government shutdown.
Global debt reached a record $307 trillion in Q2 2023, driven by the United States and Japan, despite rising interest rates hampering bank credit, according to the Institute of International Finance (IIF).
China's credit is expanding rapidly, with total social financing increasing by over 3 trillion yuan in August, mainly driven by government financing, indicating positive signs of economic stabilization and recovery from the slump in the second quarter. Additionally, recent policy measures, particularly in fiscal and property sectors, are expected to further stimulate the economy.
China's local authorities have amassed trillions of dollars in hidden debt, requiring the central government to consider drastic measures like enabling the sale of bad debt to asset managers and increasing tax revenue allocation to resolve the issue.
Chinese city and provincial governments are struggling with a financial crisis caused by a mountain of debt, leading to desperate measures such as fining restaurants and truck drivers, as they grapple with the economic impact of the COVID-19 pandemic and real estate slump.
China's top leadership is pressuring provincial authorities and state-owned enterprises to repay debt owed to private companies in an effort to address the issue of triangular debt, which is hampering economic growth; the campaign aims to ensure that state-owned enterprises take the lead in repaying debts.