China is making efforts to boost its economy.
With this intention, Beijing on Friday approved a debt financing plan of 6 trillion yuan ($839 billion). Xu Hongkai, vice chairman of the Financial and Economic Committee of China’s Parliament ‘National People’s Congress’ gave this information on Friday.
In the press conference he said that this scheme will be implemented in the next 3 years. This step of the Chinese government is expected to help local governments raise finance for their heavy debt burden and accelerate economic activities.
Finance Minister Lan Foan said that by the end of 2023, local governments are estimated to have hidden debt of about 14.3 trillion yuan ($2 trillion).
Hidden debt refers to debt which has not been publicly disclosed. He said that every year from 2024 to 2026, 2-2 trillion yuan will be given to local governments for debt settlement.
He expressed hope that this would reduce the amount of hidden debt of local governments to 2.3 trillion yuan ($320.9 billion) by the end of 2028.
Limit for issuing special bonds increased
The limit for issuing special bonds for local governments will be raised from 29.52 trillion yuan ($4.12 billion) to 35.52 trillion yuan ($4.96 billion), officials said.
Earlier, China’s central bank had relaxed restrictions on borrowing in late September. With this move, the stock markets regained momentum and after withdrawing capital from countries like India, foreign institutional investors (FIIs) started turning to China.
Shocks to the Chinese economy during the Corona epidemic
Analysts had already called for a bold move to expand debt financing to shore up China, the world’s second-largest economy.
In fact, China’s economy has not yet fully recovered from the shocks suffered during the Covid-19 pandemic. During the Corona pandemic, the debt of local governments had increased due to high expenditure and low revenue collection.
Apart from this, the slowdown in the real estate industry also slowed down China’s economy. However, there have been signs of improvement in the economy in the last 2 months. Purchase subsidies given to people exchanging old cars or appliances for new ones boosted vehicle sales again in September.
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