Efforts to deleverage the “hidden time bomb” of 40 trillion in local government debt have gained urgency after the government recently pledged to cut taxes by two trillion yuan ($300 billion), further draining local coffers and adding to the possibility of missed repayments. Meanwhile, the lack of official estimates of the total local government debt load – S&P’s CNY40 trillion estimate is just that – which usually carries higher rates than on-book ones, makes the issue even trickier.
