Home Business Local debt hits a record high Li Keqiang again raises downward pressure on the economy | Ministry of Finance | Local Government Bonds | Real Estate

Local debt hits a record high Li Keqiang again raises downward pressure on the economy | Ministry of Finance | Local Government Bonds | Real Estate

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[Epoch Times November 24, 2021](Reported by Epoch Times reporter Li Jing) Recently, Chinese Premier Li Keqiang once again mentioned the new downward pressure on the Chinese economy. At the same time, the balance of local government debt announced by the authorities has reached nearly 30 trillion yuan, a record high. However, about 60% of new debt is used to repay old debts that are due, rather than for new investment.

On November 23, the website of the Ministry of Finance of the Communist Party of China announced the issuance of local government bonds and debt balances in October this year. Data shows that from January to October this year, the CCP issued 6.49 trillion yuan of local government bonds, of which 876.1 billion yuan (RMB, the same below) was issued in October.

As of the end of October this year, the CCP’s local government debt balance was 29.65 trillion yuan.

Principal and interest repayment situation, from January to October this year, the local government bonds of the CCP paid 2.49 trillion yuan in principal and paid 811.9 billion yuan in interest. Among them, the principal repayment of 179.5 billion yuan and the interest payment of 62.2 billion yuan were due in October.

On April 21 this year, the Ministry of Finance of the Communist Party of China held an online press conference on fiscal revenues and expenditures for the first quarter of 2021. According to the relevant person in charge of the Ministry of Finance, as of the end of 2020, the balance of local government debt was 25.66 trillion yuan, which was controlled by the National People’s Congress. Within the limit of 28.81 trillion yuan, plus the central government debt balance of 20.89 trillion yuan included in budget management, the national government debt balance is 46.55 trillion yuan.

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The debt ratio of 85 cities exceeds the warning line in Guiyang as high as 929%

Just last month (October), “Securities Times” new media data treasure and Tencent Finance jointly released the “China Cities Debt Ratio Ranking”, showing that most major cities in China have debt ratios exceeding 200%. The debt ratios of cities in some economically underdeveloped regions are particularly alarmingly high.

Affected by the new crown epidemic, urban debt ratios have generally risen. The debt ratio of 85 cities will exceed 100% in 2020, and the debt ratio of 75 cities will double from 2019. The fiscal debt ratio (government debt/fiscal revenue) is used to measure the size of the debt. The more debt, the greater the pressure to repay the debt.

The top 10 cities in the 2020 debt ratio list all have debt ratios exceeding 500% that year, including 4 new first-tier cities, namely Xi’an, Tianjin, Wuhan and Chongqing.

Guiyang and Zunyi in Guizhou Province rank the top two, among which the debt ratio of Guiyang is as high as 929%; Harbin, Yichang, and Xiangyang rank 4th, 5th and 7th.

Among the four first-tier cities, Beijing and Guangzhou have debt ratios exceeding 200%.

According to international standards, the prevailing risk warning line for local government fiscal debt ratio (debt ratio for short) is 80% to 120%.

Wall Street brokerage Goldman Sachs issued a report on October 29 that the total debt of China‘s local government financing vehicles (LGFV) has surged from RMB 16 trillion in 2013 to RMB 53 trillion at the end of last year. According to a Bloomberg report, this amount is equivalent to 52% of China‘s gross domestic product (GDP), and is higher than the official total amount of the Chinese government’s outstanding debt.

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Goldman Sachs based its conclusions on the analysis of interest-bearing debt statements of more than 2,000 local government financing platforms, including bonds and bank loans. The report also pointed out that about 60% of China‘s local government financing platforms issued bonds to raise funds, used to repay debts due from 2020 to 2021, rather than for new investment.

Taiwanese economic expert Huang Shicong told The Epoch Times that many local government debts in mainland China are tied to real estate. Real estate has developed rapidly in the past years because the government has to maintain real estate and housing prices have risen. A lot of local government finances come from selling land and borrowing. Wait, some local governments even invest in real estate.

Chinese Premier Li Keqiang convened a meeting in Shanghai on November 22 and once again mentioned the new downward pressure on the Chinese economy. He talked about economic downward pressure three times in less than a month.

Huang Shicong said that once China‘s entire economy declines and real estate declines, the so-called demand expansion method of repaying debts in the past will be affected. The Evergrande debt crisis detonated the entire real estate industry in China. In addition to the impact on the housing market, the finances of local governments have also been affected.

Editor in charge: Gao Jing#

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