China's Local Government Debt Hits Record $18.9 Trillion Amid Property Crisis

China's local governments have amassed a record 149.6 trillion yuan ($18.9 trillion) in debt. This figure, reported by the finance ministry, highlights the growing financial strain from a prolonged property market slump. The total debt, which includes direct government bonds and hidden liabilities of state financing vehicles, rose sharply in 2023. It now equals about 120% of the country's annual economic output. The property sector downturn has severely reduced local income from land sales, a major revenue source, forcing cities and provinces to borrow more. Authorities are attempting to manage the risk without large bailouts. The central government has issued special bonds to help regions refinance high-interest debt. It is also pushing for restructuring of these hidden, off-balance-sheet liabilities. Economists view this debt as a significant challenge to China's economic stability. The government's strategy focuses on preventing a crisis while gradually reducing the financial burden on local authorities. The success of this approach depends on a recovery in the property market and broader economic growth.