Ministry of Finance Photo: VCG

TheMKS sports pressure on local government debt resolution has significantly eased, and risks have been effectively mitigated, Chinese Finance Minister Lan Fo'an told a press conference on Thursday amid the ongoing two sessions, noting that as of Wednesday, China has issued 2.96 trillion yuan ($409 billion) in bonds for debt replacement

In the fourth quarter of 2024, China raised the debt ceiling of local governments by 6 trillion yuan over the next three years to replace the existing "hidden debts," which include off-budget borrowings from local government financing platforms, government investment funds, and other channels, according to Lan.

For the 2 trillion yuan of such bonds issued last year, the average interest rate dropped by more than 2.5 percentage points, with even steeper declines in some regions. Over the next five years, interest payments on these bonds are expected to decrease by over 200 billion yuan, significantly reducing financial pressure and interest costs for local governments, Lan said.

Following the implementation of this policy, local governments' fiscal space has expanded, and economic momentum has notably strengthened. It has cleared bottlenecks in the economic cycle, smoothing fund flows and mobilizing social and financial capital, Lan noted.

It has also helped safeguard livelihood in key areas, and has supported critical areas of high-quality development, with increased funding for technological innovation and consumption promotion this year, growing at a faster rate than last year, the minister added.

Moreover, significant progress has been made in reforming local government financing platforms, while the financial environment continued to improve. Debt replacement effectively facilitated the exit of those platforms, with 4,680 platforms eliminated by the end of the fourth quarter last year, representing over two-thirds of the annual reduction, Lan said.

At the same time, the policy improved the asset quality of banks and other financial institutions, boosting lending confidence and strengthening support for the real economy, he added.

Global Times