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China hidden local government debt rises to over half of GDP at US$8.2 trillion, Goldman Sachs report says
- The total debt of local government financing vehicles (LGFVs) rose to around 53 trillion yuan (US$8.2 trillion) at the end of last year from 16 trillion yuan in 2013
- The report by economists at Goldman Sachs shows the debt is equal to around 52 per cent of gross domestic product
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China’s hidden local government debt has swollen to more than half the size of the economy, according to economists at Goldman Sachs, who said the government will need to be flexible in dealing with this as revenue is already under pressure due to a slowdown in land sales.
The total debt of local government financing vehicles (LGFVs) rose to around 53 trillion yuan (US$8.2 trillion) at the end of last year from 16 trillion yuan in 2013, the economists wrote in a report.
That is equal to around 52 per cent of gross domestic product and is larger than amount of official outstanding government debt.
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The LGFVs are a tool for governments to borrow money without it appearing on their balance sheets, but it is seen as the same as a government liability by financial markets.
More official local government bond issuance and increased flexibility on local government financing are probably needed to support overall economic growth [as land sales are slowing]
There were some signs earlier this year that government was making inroads in cutting this debt as the economy’s rebound gave room to focus on tackling financial risks.
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