As China defuses its time bomb of debt, US hears the ticking intensify
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But some experts now contend that, after a sweeping debt-restructuring campaign, the outlook for China is shifting. And they say that, by comparison, the debt challenges facing the United States are causing considerable alarm.
'After years of effort, the overall debt risks of local governments in China have been brought under control and are gradually being resolved,' said Zhao Xijun, a finance professor at Renmin University in Beijing.
He added that China's debt is largely held by local governments, giving the central government room to step in and assist with repayment. In the US, by contrast, the burden sits at the federal level – a situation he called 'more concerning'.
Late last year, China rolled out a 12 trillion yuan (US$1.67 trillion) debt swap – a move that significantly eased repayment pressure on local authorities, with the Ministry of Finance identifying 14.3 trillion yuan in hidden local government debt by the end of 2023, much of it accumulated through
local government financing vehicles (LGFVs).
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The swap has enabled local governments to extend repayments, with the weighted average maturity of bond issuance lengthening by 3.18 years, year on year, to 15.88 years in the first half of 2025, Beijing-based China Chengxin International Credit Rating (CCXI) said in a note last month.
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As China defuses its time bomb of debt, US hears the ticking intensify
Concerns over China's local-level debt have long loomed large in international discourse, with a mountain of 'hidden' debt viewed as a 'ticking time bomb' that threatens to trigger a cascade of defaults while posing a risk to financial stability. Advertisement But some experts now contend that, after a sweeping debt-restructuring campaign, the outlook for China is shifting. And they say that, by comparison, the debt challenges facing the United States are causing considerable alarm. 'After years of effort, the overall debt risks of local governments in China have been brought under control and are gradually being resolved,' said Zhao Xijun, a finance professor at Renmin University in Beijing. He added that China's debt is largely held by local governments, giving the central government room to step in and assist with repayment. In the US, by contrast, the burden sits at the federal level – a situation he called 'more concerning'. Late last year, China rolled out a 12 trillion yuan (US$1.67 trillion) debt swap – a move that significantly eased repayment pressure on local authorities, with the Ministry of Finance identifying 14.3 trillion yuan in hidden local government debt by the end of 2023, much of it accumulated through local government financing vehicles (LGFVs). Advertisement The swap has enabled local governments to extend repayments, with the weighted average maturity of bond issuance lengthening by 3.18 years, year on year, to 15.88 years in the first half of 2025, Beijing-based China Chengxin International Credit Rating (CCXI) said in a note last month.
