[NTD News November 24, 2021, Beijing time]The latest data from the Ministry of Finance of the Communist Party of China shows that in the first ten months of this year, the total balance of local government debt across the country has reached 30 trillion yuan (RMB, the same below), a record high. Nearly half of the new debt is used to repay old debts. In addition, the total amount of hidden debts of the CCP’s local governments has reached more than half of China’s economic scale, but these hidden debts are not on the balance sheets of local governments.
On Tuesday (23rd), the official website of the Ministry of Finance of the Communist Party of China released the latest statistics, showing that the total issuance of local government bonds nationwide from January to October this year was 6,491.6 billion yuan, an increase of 6% compared with the same period last year, setting a record high.
As of the end of October this year, the total debt balance of local governments across the country has reached 29,654.9 billion yuan. If divided by purpose, of the bonds issued by the local governments of the Communist Party of China, 2,829.1 billion yuan are refinancing bonds, an increase of 75% over the same period last year; the other 3,662.5 billion yuan are new bonds.
The above data shows that the increase in bond issuance by local governments of the Communist Party of China this year is mainly due to the heavy volume of refinancing bonds. The so-called “refinancing bonds” refer to bonds issued by local governments to repay the principal of bonds that have matured. Simply put, it means borrowing new debts to repay old debts.
Chinese financial scholar Chen Youcheng said in an interview with Radio Free Asia on Tuesday that the CCP’s local government revenue mainly comes from four aspects: government taxes, state-owned enterprise profits, debt issuance, and fines imposed by the government. In the past, the real estate market and land income were the main sources of income that local governments relied on, but now these two sources of income have problems. Evergrande, Country Garden, and the real estate sector among central state-owned enterprises have all experienced avalanche business declines. . Coupled with the impact of the Chinese Communist pneumonia (COVID-19) epidemic, China’s private enterprises have become increasingly difficult to operate, and this part of the tax revenue is also decreasing.
Chen Youcheng said: “The land finance that the local government relies on is now overwhelmed and glorious. The local government has no way, and borrowing is the only way it can “dismantle the eastern wall and make up for the western wall”.”
Chinese independent finance scholar Gong Shengli said that from the perspective of China’s local debt growth trend, it is difficult to reverse the trend of China’s local government debt growth in the short term due to factors such as reduced land taxes and increased industrial development costs.
Gong Shengli said that the current lack of money in China’s local governments “may be more severe than at any time”, and the trend of increasing local debt will continue for at least 20 years.
In fact, the above-mentioned data released by the Ministry of Finance of the Communist Party of China are only data provided on the balance sheets of various local governments, and larger hidden debts are not included.
According to a research report released by the multinational investment bank and financial services company Goldman Sachs in September this year, the total debt of the CCP’s local government financing platform (hidden debt) reached 53 trillion yuan by the end of last year, which is equivalent to China’s GDP. (GDP) 52%, and this figure is higher than the official local government debt balance.
The report pointed out that “Chinese local government financing platform” is a kind of lending tool for local governments to borrow loans through other financing methods and prevent them from appearing on the government’s balance sheet. However, the financial market will still treat these loans as local governments’ debt.
(Reporter He Yating Comprehensive Report / Chief Editor: Lin Qing)
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