Hong Kong CNN — China has approved a 10 trillion yuan ($1.4 trillion) plan to bolster its ailing economy by allowing local governments to swap out their hidden debt, unveiling additional stimulus measures to counter a potentially volatile growth path marked by the impending return of Donald Trump to the White House.
Finance Minster Lan Fo’an told a Friday press conference the six trillion yuan ($838 billion) debt limit would be made available over three years to help regional governments replace their so-called “hidden debt.” This kind of debt is normally owed by risky local government financing platforms that are backed by cities or provinces.
Lan separately added that local governments will be given access to a separate four trillion yuan ($558 billion) quota in the form of special local bonds over five years, also with the aim of trimming their debt holdings. The announcement was made at the conclusion of a five-day meeting by China’s top legislative body, the Standing Committee of the National People’s Congress.
“Since the beginning of this year, affected by a variety of factors, the central and local fiscal revenues have fallen short of expectations,” Lan added.
Years of strict pandemic controls and a real estate crisis have drained local government coffers in China, leaving authorities across the country struggling with mountains of debt. The lack of money means governments have few resources to kick start economic growth.
The problem has gotten so extreme in some places that cities are now unable to provide basic services, and the risk of default is rising.