In Depth: Why China’s Efforts to Resolve Hidden Government Debt Could Fall Short - Caixin Global

China’s central government has rolled out a new round of measures since the second half of last year to help local governments swap or restructure their off-the-books borrowing in a bid to control debt risk. However, the sheer scale of the country’s local government hidden debt — up to more than 70 trillion yuan ($9.8 trillion) according to some estimates, more than twice Germany’s GDP — means that the measures at best are far inadequate and will provide only temporary relief to what experts say is a looming liquidity crisis for regional authorities. At worst, it could further inflame the problem, promoting more off-the-books borrowing and increasing risk to economic and financial stability in the world’s second-largest economy, whose wobbly post-pandemic recovery has investors spooked, dragging the benchmark CSI 300 Index down 11% last year. Local government financing vehicles (LGFVs), state-owned companies set up to borrow on behalf of local authorities, are responsible for the heavi

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