One of China’s most debt-ridden provinces asks Beijing for help in now-deleted online post
- Researchers in landlocked Guizhou surveyed some of the province’s most indebted cities and found it ‘impossible’ to solve their debt problems at local levels
- Local-level debt has long been a problem in China, but the pandemic and a raft of other economically crippling policies have hindered debt-relief work
The local government overseeing one of China’s most indebted provinces has openly admitted that it is grasping at straws to solve its debt problems, while calling on help from Beijing.
Authorities with the Development Research Office of Guizhou province said in a since-removed article posted to the provincial government website on Tuesday that, “due to limited financial resources, it is extremely difficult to advance debt-relief work”.
“And it is impossible to effectively solve [the debt problem] by relying on [the local government’s] own ability.”
The conclusion was drawn from data collected by the office’s researchers when surveying some of the most indebted cities in the southwestern province, including Guian, Zunyi, Bijie and Liupanshui.
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“The survey found that debt has become a major and urgent problem facing local governments [in the province].”
It also said the research team will seek intellectual support from the Development Research Centre of the State Council, to provide practical suggestions for resolving the debt problems in Guizhou.
The article could no longer be found on the official website as of Wednesday afternoon, but it had already been cited by a few Chinese news sites.
The mountainous, landlocked province of more than 38 million people has struggled to raise funds in capital markets in recent years, as a result of its deteriorating credit profile.
According to a report from Guosheng Securities on Tuesday, local governments in China generally lack the ability to solve their debt problems independently and need help from higher levels of authorities.
“The premise of a rescue from higher-level governments is that they need to know the scale of debts, more details about the type of debts, and the corresponding projects behind the debts. Then they can determine the scope of their responsibility to offer effective assistance,” the report said.
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The possibility of a top-down bailout by Beijing is small, due to fiscal discipline, and local governments are being left to their own devices in resolving debt crises, despite significant financial pressure, the report added.
Amid the rising danger of LGFV defaults, against the backdrop of an economic slowdown, China’s authorities have been exploring debt-restructuring approaches in some of its most vulnerable provinces.
This could foreshadow an increase in similar proposals, including negotiations with banks to lower funding costs, according to a note from Fitch Ratings in January.
