China’s outstanding local government debts rose to a record of 40.74 trillion yuan ($5.71 trillion) by the end of 2023, the communist regime’s Ministry of Finance stated on Jan. 30.
Nationwide, local governments issued 9.34 trillion yuan ($1.31 trillion) of new bonds in 2023, a year-over-year increase of 27 percent, data show. Last year, the scale of local borrowing rose to a record, nearly 2 trillion yuan ($280.8 billion) more than in 2022.
In December 2023 alone, local government bond issuance reached 195.6 billion yuan ($27.5 billion).
With the rapid increase of local government debts, bond interest payments are rising year by year. The data from the Ministry of Finance show that interest payments on local government bonds in 2023 were 1,228.8 billion yuan ($172.5 billion). This interest payment scale has jumped by 9.6 percent from the previous year to the highest level since 2015, according to statistics from the Chinese financial media outlet Caixin.
Local government bonds are divided into new bonds and refinancing bonds according to their uses. The former’s funds are mainly used for the construction of major projects such as infrastructure, while the latter’s are used to repay the principal of maturing local government bonds or existing debts, which means borrowing new debts to pay back old debts.
Since the implementation of the Chinese Communist Party’s (CCP) new “Budget Law” in 2015, the issuance of local government bonds has become the only legal way for local governments to borrow. The scale of local debts has expanded rapidly in recent years, and local borrowing increased significantly last year.
Guangdong, China’s richest province, continues to rank first in bond issuance, according to the latest data.
In 2023, that province reached 687.1 billion yuan ($94.5 billion), closely followed by Shandong Province with 631.1 billion yuan ($88.6 billion). Hunan Province ranked third with 468 billion yuan ($65.7 billion), while Jiangsu and Zhejiang rose to 458 billion yuan ($64.3 billion) and 454.8 billion yuan ($64.4 billion), respectively, for fourth and fifth.
Anhui jumped to sixth place with 448.3 billion yuan ($62.9 billion), while Sichuan, Hebei, Guizhou, and Henan also issued bonds exceeding 400 billion yuan ($56.2 billion).
Henry Wu, a macroeconomist in Taiwan, told the Chinese edition of The Epoch Times that the core of China’s economic problems is a debt crisis, that is, its debt economic model can’t continue.
“An important feature of China’s economy is that its development is based on debts, borrowing money to carry out development,” he said. “Now, China’s economy has fallen into the trap of a debt economy, which has led to financial crisis, fiscal crisis, employment crisis, [and more].”
While the released numbers are only the explicit debts of China’s local governments that are officially recognized, a bigger problem is local governments’ implicit debts, as pointed out by experts. At present, China’s local implicit debts are mainly concentrated in local government investment and financing platform companies, according to Chinese finance media outlet Yicai.
Wang He, an expert on China affairs and an Epoch Times columnist, wrote that the most prominent problem with local implicit debts is that the base number is unclear. Governments at all levels of the CCP are deceiving each other, and no one can know the real numbers.
