Local-government debt in China: Swapping spree

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Local-government debt in China


The finance ministry moves to ease local governments’ money troubles



EVER since China’s gargantuan stimulus of 2009, which was unleashed to repel the global financial crisis, people have worried about how the debts incurred would be repaid. This week the finance ministry provided a partial answer, in the form of a scheme to restructure the liabilities of local governments, the most indebted of China’s public institutions.
Local governments will be allowed to swap 1 trillion yuan ($160 billion) of their existing high-interest debts for lower-cost bonds. Such swaps could become a feature of China’s fiscal landscape over the next few years, given that local debts may have reached as much as 30 trillion yuan, or 47% of GDP, according to Wei Yao of Société Générale, a French bank.

The restructuring does not reduce these vast debts, but it does make them much easier to bear. Local …<div class="og_rss_groups"></div>