China's local governments struggle with hidden debt

Beijing worried that large defaults could destabilize financial system

20230508 Caixin2

An employee seals a stack of yuan banknotes at a bank in Huaibei, Anhui province, China. © Reuters

ZHANG YUKUN and CHENG SIWEI, Caixin

Tackling the mountain of hidden debt accumulated by China's local governments is, once again, at the top of the political agenda as the economy gets back on track after a three-year pummeling from the COVID-19 pandemic.

Concern about the risks to the financial system and the sustainability of local government finances from trillions of yuan of invisible liabilities has stretched to the pinnacle of policymaking.

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