A Chinese flag flies atop the Great Hall of the People ahead of the opening ceremony of the Belt and Road Forum (BRF), marking the 10th anniversary of the Belt and Road Initiative, in Beijing, China on October 18, 2023.
Edgar Su | Reuters
BEIJING – A closely watched meeting of the Chinese parliament’s standing committee on Monday discussed a proposal to raise the local government’s debt limit. state media.
New debt would replace hidden debt, the report said, noting that Finance Minister Lan Fo’an spoke about the plan during the meeting.
Lan indicated at a press conference last month that an increase in the local debt limit was in the works. Local governments in China have traditionally been responsible for much of public service spending, but have struggled financially as revenue from land sales to developers has fallen.
China has about 50 trillion to 60 trillion yuan (about $7 trillion to $8.45 trillion) in outstanding hidden debt, according to Ting Lu, chief China economist at Nomura.
In a report Friday, he estimated that about 10 trillion yuan in additional debt quotas could be approved in the coming years to offset some of the hidden debt.
“Beijing could eventually increase the debt swap to RMB15 trillion if the Chinese economy faces even greater challenges,” Lu said.
The standing committee of China’s National People’s Congress is meeting this week and is widely expected to approve further budget support for the country’s slowing economy. Commission chairman Zhao Leji will lead the meeting, which will end on Friday.