China's hidden local debt soars to 58tn yuan

China's "hidden" local government debt was estimated to have reached as high as 58 trillion yuan (HK$64.7 trillion) by the end of last year, which was up to 1.7 times higher than the bonds that were known to have been issued, according to a Caixin report citing China Chengxin Credit Rating Group.

China Chengxin, the first nationwide credit rating company in China, warned this would mean local government debt could be up to a high of 92 trillion yuan overall.

It estimated that local governments' so-called "hidden" debts stood between 52 and 58 trillion yuan, or 1.5 to 1.7 times more than their "explicit" debts.

Goldman Sachs estimated that if borrowings outside budget were also considered, the total debts facing provincial governments would be around US$23 trillion (HK$179.4 trillion), equivalent to 126 percent of their gross domestic products.

An example is Guiyang. The capital city of the Guizhou is currently at the peak of debt repayment but the city lacks financial means or options to either extend repayment obligation that are due or raise new debts to address its existing 38.8 billion yuan debt burden.

Inner Mongolian city Hohhot has also reached out for assistance after the city's finance bureau admitted it was facing "challenges" in improving financial balance in the face of heavy debts and amid difficulties in making temporary payments.

The city's current "hidden" debts are estimated to be around 92.84 billion yuan, adding pressure to servicing debts and leaving limited room to resolve its debt crisis through alternative means.

Although the mainland economy is recovering from the pandemic, local governments' revenue from land sales has continued to be sluggish. In the first four months this year, revenue from land sales dropped nearly 17 percent from that of the same period last year.