Wednesday, April 17, 2024

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China orders local governments to cut exposure to public-private projects as debt risks rise

Government

Reuters exclusively reported that China has ordered its local governments to halt public-private partnership projects identified as “problematic” and replaced a 10% budget spending allowance for these ventures with a vetting mechanism by Beijing as it tries to curb municipal debt risks.

Market Impact

Debt-laden local governments represent a major risk to the Chinese economy and its financial stability, economists say, amid a deepening property crisis, years of over-investment in infrastructure and huge bills to contain the COVID-19 pandemic. A portion of the $12.6 trillion local government debt is linked to the PPP projects, as municipalities used these infrastructure-building initiatives as a conduit to raise capital. As of the end-2022, China had implemented more than 14,000 PPP projects with the value of investment worth 20.9 trillion yuan ($2.87 trillion), or roughly the size of France’s economy, according to a research note by Bank of China. 

Article Tags

Topics of Interest: Government

Type: Reuters Best

Sectors: Economy & PolicyGovernment & Public Services

Regions: Asia

Countries: China

Win Types: Exclusivity

Story Types: Exclusive / Scoop

Media Types: Text

Customer Impact: Important Regional Story


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