Beijing’s debt nightmare
Pandemic pushed debt up to 280 per cent of GDP in 2020. Local governments’ "hidden" debt threatens the country’s financial stability. The authorities have reacted by blocking investment in infrastructure. The impact of government clampdown on hi-tech giants and private tutoring remains unclear.
Beijing (AsiaNews) – Fears about China’s debt are growing.
Despite the post-COVID-19 economic recovery in the second half of 2020, China’s accumulated debt reached 280 per cent of gross domestic product (GDP).
According to China’s central bank, the People's Bank of China, the ratio was 255 per cent in 2019.
For several observers, the debt is actually much higher since official data do not take into account debt issued by local governments.
For Wang Zhaoxing, a former vice-chairman of the China Banking and Insurance Regulatory Commission, property loans and "hidden" local government debt are a potential threat to China’s financial stability, the South China Morning Post reported.
To boost growth, China has traditionally focused on infrastructure investment over the past 30 years.
However, the need to reduce the growing debt, while the country is still struggling with the coronavirus pandemic, has pushed central authorities to postpone some infrastructure projects, especially those authorised by local administrations.
Many provinces are in fact at risk of bankruptcy, as a result lower tax revenues caused by the health crisis.
In 2017, Beijing put a cap of 250 per cent of GDP on its overall debt. The COVID-19 emergency wrecked that plan.
Last year, to jumpstart the economy, the government rolled out a 3.6 trillion yuan US$ 557 billion) stimulus plan, but this further exacerbated the debt situation.
Now, fresh coronavirus outbreaks threaten the country's economic recovery, which continues to slow down. The effects of severe floods in central China and the rise in commodity prices are complicating matters.
In the short to medium term, the government's campaign to regulate the country’s hi-tech giants (including the videogames industry) has to be taken into consideration.
The same goes for planned new rules for the booming private tutoring industry, whose value rose from US$ 120 billion in 2019 to US$ 155 billion in 2025.
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05/04/2019 13:53
17/07/2020 14:38
