China’s debt-based interest payments top a trillion yuan for first time, raising concerns about financial risks
- Total interest paid on bonds at local levels in China last year increased by nearly 21 per cent from 2021 as Beijing ramped up efforts to stabilise the nation’s economy
- Analysts expect local governments to issue a record-high 7.5 trillion yuan worth of bonds this year, and much of that will go to infrastructure projects
Local governments had to pay a total of 1.12 trillion yuan (US$165 billion) in interest on bonds in 2022, up from 928 billion yuan in 2021, according to data released by the Ministry of Finance on Sunday.
And a total of 3.67 trillion yuan worth of local government bonds will mature in 2023, according to financial data provider Wind.
The data, released by the Ministry of Finance, reflects the growing pressure of debt repayment among local governments. But since regional authorities often also borrow heavily off-budget, the overall debt to gross domestic product (GDP) could, in practice, be considerably higher than official data.
China’s debt-to-GDP ratio in the third quarter of 2022 rose from 273.1 per cent at the end of the second quarter to 273.9 per cent, or 0.8 percentage points, according to data released last year by the National Institution for Finance and Development.