China’s Top Legislative Body Approves Bill to Raise Local Government Debt Ceilings

China’s Vice Chairman of the National People’s Congress (NPC) Financial and Economic Affairs Committee announced on Friday that Beijing has approved a bill to increase local government debt ceilings, aiming to replace existing “hidden” debts.

Key Takeaways:

• China plans to raise the local government debt ceiling by 6 trillion yuan.
• The new debt quota will be used to replace existing debt, helping to address local government debt risks.
• The NPC’s approval will facilitate the overhaul of local government financing vehicles to curb new debt accumulation.
• A significant policy shift, the move will allocate 6 trillion yuan in local government debt quota to resolve “hidden” debts, with 2 trillion yuan dedicated to debt swaps each year.
• China’s “hidden” local government debt stood at 14.3 trillion yuan at the end of 2023.