The report says that China is looking into tackling the issue of unpaid bills owed by local governments to the private sector, which as a whole is estimated to be over $1 trillion. The government is said to mull requesting state lenders to lend to local authorities so that they would be able to make payments.
One of the sources said that talks touched upon looking to cover at least ¥1 trillion ($140 billion) of debt owed to private companies in the first phase. The end goal is to complete the task by 2027 but makes no mention of the overall amount of funding assistance that will be offered after the initial layout.
For some context, the amount owed by local government entities to corporates and civil servants is estimated to be near ¥10 trillion ($1.4 trillion). So, that’s the big number that needs to be addressed with it being equivalent to 7% of China’s GDP last year.
The issue with these unpaid bills is that it creates further animosity and distrust at the social level in China. Delayed payments to companies by the government won’t go down well in the private sector and would just create further levels of dissatisfaction, threatening president Xi Jinping’s larger goal of ‘common prosperity’.
