New development: Is China’s local government debt problem getting better or worse?

IMPACT

As the world deals with the Covid-19 pandemic, debt risks are increasing, as is the pressure to hide debt. The lessons learnt from analysing the progress made by China in controlling hidden debt will be of use to accountants, financial managers and policy-makers in other countries. The authors also make suggestions for the Chinese local and central government going forward.

ABSTRACT

China’s central government has been addressing the country’s local government hidden debt since 2015 with the introduction of a ‘New Budget Law’ to make the debt explicit (transparent). The authors discuss the progress made, the continuing systemic risk of hidden debt, and the impacts of central government action on debt costs and funding opportunities. This paper adds to the literature on the management of general government debt.

KEYWORDS:

• China’ debt transparency
• hidden debt
• local government bonds

Acknowledgements

The research for this article was sponsored by the Educational Office of Liaoning Province (project LJC202041), the Social Science Planning Fund Program of Liaoning Province (project L14BGL017) and Liaoning University’s doctoral research fund.

Disclosure statement

No potential conflict of interest was reported by the author(s).