Economic problems
China is helping heavily indebted local governments
China’s government has recently announced several economic stimulus measures. It is now also helping local governments with a large debt package.
As a further measure to ease the burden on the economy, China has announced a debt restructuring program for its local government. The authorities therefore want to issue bonds worth an additional ten trillion yuan (around 1.3 trillion euros) over a period of several years. Local governments should use the funds to shift their “hidden debt” and thus reduce risks in the financial system, as Finance Minister Lan Fo’an said, according to Chinese state broadcaster.
In China, hidden liabilities are a problem because local governments have often borrowed money indirectly in the past to finance infrastructure projects, for example. However, the practice brought significant risks as the debt burden often did not appear transparently in public financial reports.
Beijing wants to achieve a growth target of around five percent
The decision came at the end of the week of meetings of the Standing Committee of the National People’s Congress, which approved the measures. Against the backdrop of a weakening economy, Beijing is struggling to achieve its self-imposed economic growth target of around five percent this year. Several measures to support the economy had already been announced in the past few weeks.
The crisis in the real estate sector, which once served as a growth driver for China, is particularly slowing down the economic engine. Consumer confidence has therefore been broken, which is also the reason for the low domestic consumption. In addition, young people in particular have problems finding work. In addition, there are various trade disputes and tariffs that impact economic performance.
dpa
Source: Stern
