A Chinese national flag flutters on the Pearl River in Guangzhou, Guangdong province, China. Picture: REUTERS
That implies cities and provinces may have used some of the proceeds to repay off-balance sheet debt, said Robin Xing, chief China economist at Morgan Stanley in Hong Kong. “Hidden debt” refers to funds raised by government-related entities, such as local-government financing vehicles, to pay for infrastructure spending and other public projects. The debt raised is kept off the balance sheets of local authorities, yet carries an implicit government guarantee of repayment.
“The government is keeping a low profile but is determined, and local authorities are quietly making efforts” to deal with it, he said. In Shaanxi province, authorities included tackling hidden debt as a criteria to evaluate officials’ performance from this year, while Guizhou province said it had resolved 33.7-billion yuan of off-balance sheet debt in the first six months of 2021. Shenzhen city, China’s technology hub, pledged to clear all its hidden debt in 2021.