China unveils $1.8 tn package to help debt-ridden local governments but falls short of providing strong stimulus

The Chinese authorities noted that the new economic measures could cut the debt of local governments to 2.3 tn yuan by the end of 2028. The fiscal package which is expected to help local governments boost their economies includes raising the debt ceiling by 6tn yuan over three years. The initiative would help the local government to replace their hidden debt which the authorities have estimated to be at 14.3 tn yuan at the end of 2023, South China Morning Post reported. The news outlet maintained that the economic package would help the government to “develop a better economy and protect the livelihoods of people.” However, experts believe that the debt relief package did not come close to “resolving the enormous debt problem.” Prof Victor Shih, an expert on the politics of Chinese banking and fiscal policies at the University of California San Diego in the US explained that it is just an “accounting exercise”.