Current and former officials of China’s finance ministry raised alarms over risks posed by surging local government debt, calling for greater control over borrowing and for giving authorities more flexibility in the sources of revenue they can use to repay bonds, reported Caixin.
The value of outstanding local government debt is expected to reach RMB 26 trillion ($4 trillion) by the end of 2020, Xue Xiaogan, deputy director of the Ministry of Finance’s Government Debt Research and Evaluation Center, told a forum Tuesday.
That’s an increase of 22% since the end of 2019, when the figure was RMB 21.3 trillion, and is up from 16.5 trillion yuan at the end of 2017, the year the government embarked on a campaign to curb financial risks, reported Caixin.
Xue said the overall ratio of outstanding debt to local governments’ “comprehensive financial resources” –– mainly on-budget local fiscal revenue, tax refunds, transfer payments from the central government, land sales and some off-budget revenue –– is now approaching 100%, which he described as the lower limit of a warning range. The ratio was 82.9% at the end of 2019, finance ministry data show.