China’s $2.3 Trillion Hidden Debt Is Seen Climbing Even Further

[Michael Corleone]

The key is not debt, but positive debt balance. If I owe A LOT OF debts but at the same time other people owe me even more debts, I don't really have a positive debt balance, do I?

Agreed

 

[ziaulislam]

China’s $2.3 Trillion Hidden Debt Is Seen Climbing Even Further

China’s local governments had 14.8 trillion yuan ($2.3 trillion) of hidden debt last year, and the figure could climb even further this year, according to a government-linked think tank.

Local governments were under pressure to increase infrastructure investment and shore up growth through the pandemic, leading to a 6% rise in off-budget borrowing from a recent low of 13.9 billion yuan in the third quarter of 2019, according to Liu Lei, a senior researcher at the National Institution for Finance and Development.

The hidden debt is comprised of funds raised by government-related entities for infrastructure and other public projects that carry an implicit official guarantee of repayment. Bonds sold by local government financing vehicles, or LGFVs, are one way provincial authorities raise money to increase spending without including it on their official balance sheets.

China has vowed to stabilize its macro leverage ratio and lower the government debt ratio this year to rein in risks. That could be hard to achieve as on-budget spending can’t cover the investment needed to drive the economy’s targeted growth by 2035, said Liu, whose organization is under the influential state-run Chinese Academy of Social Sciences and advises the government.

“Local governments will find ways to increase hidden debt because they are under pressure to expand investment,” Liu said in an interview. “In the longer term, the economy still faces lots of headwinds, including an uncertain external environment and an aging population.”

Technically Illegal
China doesn’t have an official account of local governments’ hidden debt, as it’s technically against the law. Estimates by different institutions could vary significantly. One estimate by S&P Global Ratings in 2019 put the size at 20 trillion yuan, while another that same year from Rhodium Group put it at 41.2 trillion to 51.7 trillion yuan.

Liu’s calculation includes bonds issued by LGFVs and borrowing by government-linked trust funds, insurers and other investment firms. It doesn’t take into account bank loans to LGFVs, which may be used on commercial projects instead of public welfare projects.

Local government will have to repay a record high 2.14 trillion yuan worth of LGFV bonds maturing this year, Bloomberg calculations show.

The hidden debt could have led to more than 700 billion yuan a year in extra interest payments, as such borrowing is more costly to service than government bonds, he said. It also creates risks to the stability of China’s financial system, as all kinds of financial institutions -- including banks, brokerages and trust funds -- have bought the debt, Liu added.

Last year’s increase came after debt declined from a peak of 16.6 trillion yuan in 2016, as authorities transformed some of the borrowing into government bonds and moved them onto official balance sheets.

China’s $2.3 Trillion Hidden Debt Could Climb Even Further

China’s local governments had 14.8 trillion yuan ($2.3 trillion) of hidden debt last year, and the figure could climb even further this year, according to a government-linked think tank.

www.bloomberg.com

what ?????????just 2.3 trillion,?????????
this is nothing
china GDP is 20+ t

even if the debt was 20 t it would still be fine seeing how much china is growing


the actual estimate for china local debt is around 15-20 t and foreign debt around 3-4t

 

[kongn]

 

[leviathan]

lol Good! keep watching those. It help you sleep at night.


China post-COVID export growth sets new record

China post-COVID export growth sets record – DW – 03/07/2021

The latest figures have smashed analysts' predictions for the world's second-biggest economy.

www.dw.com

Exports spiked a huge 60.6% on-year in the January-February period, official data showed on Sunday.

 

[gangsta_rap]

wtf is a 'hidden' debt?

 

[Beidou2020]

Debt denominated in your own local currency does not matter. Debt is a concern only if it’s denominated in foreign currencies.

 

[CAPRICORN-88]

I will be more concern about US 10.3 trillion Corporate Debts not even mentioning its external debts.

China hidden debts mean it is mere speculation and may be a fabrication
But to me, it is a distraction from the real thing - US National debt which is already close to 140% to its GDP.
So USA is now trying to start a war to escape from paying its debt.

Only problem is: Unlike post WW2 USA is not the only major economy around and it is practically manufacturing NOTHING.

 

[GumNaam]

I would've taken the article seriously but then I saw the bloomburg link and stopped reading.

 

[52051]

Don't get too excited by academic papers and their citations. They are only useful for getting tenures, not a deciding factor in technological prowess.

Patents are another reliable indicators where China leave the US in the dusts.

Correlation between research output and one country's long term tech level is pretty high so don't be a fool and waste my time, thanks.

 

[Beast]

China should pay as much as possible for CPEC

Pakistan should take as much as possible from China, get our country built then we see them

Not wait untl haters like you are banned from talking about China.

You want to take out money while hate us at the same time? A typical mentality of eat the whole pie while contribute nothing.

 

[nang2]

Patents are another reliable indicators where China leave the US in the dusts.

Correlation between research output and one country's long term tech level is pretty high so don't be a fool and waste my time, thanks.

Thanks for letting me know that you are such a rude person. Let me ignore you with pleasure.