‘We can’t fall behind’: China’s local debt woes hurt firms, create distrust
==========
China's local government debt rose by 14.3% to 41.4 trillion yuan ($5.7 trillion) by the end of February. The debt has hurt private firms and created grass-roots distrust. Local government debt has torn apart the fundamental trust system that upholds social governance order. Feng Chuan, an associate professor at Wuhan University, called for greater efforts to rebuild social trust and business confidence. Local land sales in Guizhou province dropped to 100 million yuan a year, making it difficult to cover the annual interest payment of its 8 billion yuan of debt. Local officials are motivated to grow the economy to gain promotion, inflating figures to meet growth targets. Many heavily indebted villages continue to apply for government funding for more construction projects. The central government must be wary of excessive local borrowing to create 'model villages' in a campaign-style manner. Local authorities have been caught up in a 'city-building campaign', where investments far exceeded their fiscal capacity to reach 'unrealistic political goals'.
#China #LocalGovernmentDebt #PrivateFirms #Trust #EconomicRecovery