In Depth: China’s Multitrillion-Dollar Salve for Local Government Hidden Debt

The problem of hidden debt — borrowings by local governments that don’t show up on their official budgets — had been building up for years in China. Photo: AI generated

At a press conference on Nov. 8, China unveiled a 10 trillion yuan ($1.4 trillion) package for its local governments to deal with their hidden debt, fulfilling Finance Minister Lan Foan’s promise of “the most significant measure introduced in recent years” to tackle the issue.

The problem of hidden debt — borrowings by local governments that don’t show up on their official budgets — had been building up for years before the central government last year rolled out a package of measures to deal with it, a sign that Beijing’s concern for relevant risks has intensified.

The buildup in local government hidden debt is in large part a byproduct of China’s rapid economic growth, of which state-driven infrastructure investment has played a key role.

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