Commentary on Political Economy

Tuesday 5 December 2023

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China’s Colossal Hidden-Debt Problem Is Coming to a Head

Updated Dec. 5, 2023 3:59 am ET

At the People’s Bank of China in Beijing, regulators are trying to address the risks of the country’s hidden debt. Photo: mark r cristino/Shutterstock

China is trying to defuse a financial time bomb that could severely damage its banking system.

Cities and provinces across the country have accumulated a massive amount of hidden debt following years of unchecked borrowing and spending. The International Monetary Fund and Wall Street banks estimate that the total outstanding off-balance-sheet government debt is around $7 trillion to $11 trillion. That includes corporate bonds issued by thousands of so-called local-government financing vehicles, which borrowed money to build roads, bridges and other infrastructure, or to fund other expenditures. 

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