China Local Governments Face Debt Squeeze Worth $2 Trillion
- Over 40% of outstanding provincial debt due in next five years
- Central government urged to sell more debt to help provinces
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Signs are growing in China that local government debt burdens are becoming unsustainable.
China’s 31 provincial governments have a stockpile of outstanding bonds that’s close to the Ministry of Finance’s risk threshold of 120% of income. Breaching that line could mean regions will face more regulatory hurdles to borrow, hampering their ability to drive up economic growth.