China unveils $1.4 trillion stimulus package to address 'hidden' debt
China has unveiled a five-year CNY 10 trillion ($1.4 trillion) financial plan to tackle the problem of 'hidden' debt in local governments. The plan, announced by Finance Minister Lan Fo'an, will be rolled out from this year until the end of 2026. The plan includes an annual allocation of around CNY 2 trillion to local authorities and special bonds worth CNY 800 billion annually over the period.
Plan aims to significantly reduce hidden debt by 2028
The newly announced financial strategy is expected to drastically cut hidden debt from CNY 14.3 trillion to CNY 2.3 trillion by 2028, Lan said. The announcement comes after a series of stimulus measures were introduced since late September, which have sent the stock market soaring. Unveiled after a five-day parliamentary session, the plan is part of China's broader efforts to bolster fiscal support and end the real estate market slump.
China's real estate slump and COVID-19 controls strain local revenues
The persistent real estate slump in China has drastically diminished a key source of local government revenues. Regional authorities have also been forced to spend money on COVID-19 control measures during the pandemic. By the end of 2019, local Chinese government debt had reached 22% of GDP, according to an International Monetary Fund report, outpacing the revenue growth to service that debt.
