Governor Pan Gongsheng of the People’s Bank of China (PBOC) recently affirmed the central bank’s commitment to provide emergency liquidity support and increase credit aid to debt-burdened local governments and property developers. The announcement was made at the Annual Conference of Financial Street Forum 2023.
Throughout 2023, Chinese financial regulators and related authorities have initiated a series of measures aimed at mitigating the risks associated with local government debts. These measures include transforming Local Government Financing Vehicles (LGFVs) into financially autonomous, market-oriented entities, thereby reducing their reliance on government credit and promoting financial independence.
In his address, Gongsheng emphasized that the central bank will facilitate debt resolution strategies such as maturity extension, refinancing, and debt swaps for financial institutions. He also highlighted that restrictions have been put in place to prevent heavily indebted local governments from launching new investment ventures.
Additionally, Gongsheng noted that China’s government debt is lower-middle on a global scale. He urged local governments and LGFVs to utilize asset-related earnings for debt repayment as part of their strategies to manage their debt burdens.
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