China is preparing to tackle the significant backlog of unpaid bills owed by local governments to the private sector, according to people familiar with the matter, an amount of arrears some have estimated at over $1 trillion, reports Bloomberg. The government is considering asking state lenders and policy banks including China Development Bank to lend to local authorities so they can make the payments in arrears, the people said, asking not to be named because the matter is private.
The amount of money under discussion would plug at least RMB 1 trillion ($140 billion) of debt owed to private companies in the first phase of a longer-term initiative, one of the people said. Officials aim to complete the task by 2027, according to the people.
Chinese leader Xi Jinping warned in a February speech made public last month that the government’s delayed payments to companies risks undermining people’s trust in the authorities. Underscoring the importance Beijing is placing on the issue, China’s top leader said unpaid bills could “cripple” affected businesses in the embattled private sector and was hurting “society at large.”