China’s Local Debt Problem Needs Political, not Economic Solution

BEIJING — Since 2009, China’s credit-fueled economic stimulus plan has dramatically increased overall indebtedness and created new risks to long-term headline growth. Among the most acute of these is mounting local government debt, which has tripled as a percentage of GDP since 2008 amid a carnival of inefficient spending. Clearing up the mess has emerged as a key challenge for maintaining strong economic growth. However, the solution is as much political as economic and requires a fundamental rebalancing of the power relations between central and local government. Compared to most developed economies, China’s national debt levels remain low at around […]

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