Capital-thirsty local governments are embarking more on off-budget borrowing to continue their debt-fueled binge, undermining China’s years-long battle to contain the runaway growth of government debt, according to Caixin. By the end of 2016, combined debt of central and local governments in China stood at 27.3 trillion yuan ($4 trillion), with a debt-to-GDP ratio of about 36.7%. The outstanding local government debt totaled 15.3 trillion yuan, according to official data. To control the spiraling local debt, the central government has since 2014 tightened its grip on local government borrowing through an amendment to the budget law and a slew of policies targeting local governments and their financing vehicles. But local governments have turned to off-budget borrowing, and some experts estimated that by the end of 2015, local governments’ hidden debt pile through off-budget borrowing methods reached 35 trillion yuan. The same year, the country’s parliament capped the total on-budget borrowing of local governments at 16 trillion yuan.
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