Review of Local Government Debt Bill in China

BEIJING (Reuters) – Chinese lawmakers reviewed a cabinet bill aimed at increasing local government debt ceilings to tackle hidden debts during a meeting of the National People's Congress (NPC) Standing Committee.

The proposed legislation is crucial due to the substantial burden of local government debt impacting investment and economic growth. The State Council's proposal was explained by Finance Minister Lan Foan, with a report from Xu Hongcai, Vice Chairman of the NPC Financial and Economic Affairs Committee.

Since the second quarter, the Chinese economy has faced challenges, particularly from a prolonged downturn in the property market and rising local government debt. Last month, Lan Foan mentioned plans to significantly increase government debt to support consumers and the property sector, though specific details were not provided.

Plans for a large-scale debt swap program are underway, alongside continued use of bond quotas for debt resolution. Lan characterized these measures as the strongest debt reduction steps in recent years, with detailed policies pending legal procedures.

Recent reports suggested that China could approve new debt issuance exceeding 10 trillion yuan ($1.4 trillion) to address hidden local government debt and manage unsold property inventories. An announcement is expected soon.

Additionally, sources indicated that if Donald Trump wins the U.S. presidency again, Beijing might unveil a more robust fiscal package due to anticipated economic challenges.

Note: The exchange rate is approximately ($1 = 7.0955 Chinese yuan renminbi).