The central government is aware that it is subject to international scrutiny. As the country’s estimated GDP stood at $14,092 billion at the end of 2017, the government’s projections for local government debt amount to 21.82% of GDP. The figure of 16.61 trillion Yuan works out to $2,432 billion, 20.99 trillion Yuan is equivalent to $3,075 billion. The country’s central government declared a cap on local borrowing of 20.99 trillion Yuan for 2018. Other reports by domestic news outlets within China put the 2018 figure for local government debt at 16.61 trillion Yuan in April of that year. To learn about China’s GDP health, their most exported and imported products, and how the nation’s economy contributes on a global scale, see our Economic Overview Of China.Ī 2018 investigation by BNP’s Investors’ Corner estimated that China’s local government debt represented a figure over 50% of the country’s GDP. However, most of that debt is owed by local government. ![]() The IMF estimated China’s national debt to be 51.2% of GDP by the end of 2017. The central government then directed state-owned banks to buy the bonds, thus cycling new capital into privately-owned banks through the accounts of the local government. This issue was largely unsold because the municipal bonds offered a lower return than other investment options in China. The central government directed local governments to bail out the banks in their areas by issuing municipal bonds to raise sufficient funds. Local government debt first became a national issue in 2015 when the country experienced a banking crisis. Local government has the right to raise its own funds through the direct issuance of bonds. What Is China’s Local Government Debt?Ĭhina’s provinces and local governments enjoy a high degree of autonomy and this extends to their financing. The central government also controls the financial activities of local governments by issuing guidance to state-owned banks on the loan policy they should undertake with respect to local government. The Ministry of Finance implements policy with respect to local government debt through a series of warnings and encouragements. The Ministry of Finance and even the Minister of Finance is answerable to this committee, which is steered by the President of the Republic, Xi Jinping. ![]() Overall economic activity and public finances are governed by a separate committee, called the Central Economic and Financial Commission. ![]() The Chinese central government’s Ministry of Finance is responsible for raising funds for the national government and also supervising debt instruments issued by local governments. There are two types of public debt instruments in China:
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