Analysis: How China Tackles Local Governments’ Hidden Debt While Supporting the Economy

Since October, China has used a variety of fiscal policy tools to tackle risks from local governments’ hidden debt and promote economic growth

Sustaining the effect of the proactive fiscal policy may require coordinating policies, allocation of funds and projects.

Curbing risk

The country has stepped up efforts to resolve existing local government hidden debts and contain new ones.

One of the initiatives involves implementing a comprehensive debt-resolution package, which includes allowing local governments to issue special refinancing bonds and use the proceeds to repay hidden debts. As of mid-November, the latest round had seen 28 cities and provincial-level regions disclose plans to issue special refinancing bonds worth a combined 1.25 trillion yuan ($176.3 billion).