China’s local governments are reporting worsening financial conditions. Their debt ratios have been increasing yearly, posing greater challenges in effectively managing financial risks.
China experts say that with 31 provincial-level governments across the country entering an irreversible and deep financial deterioration and the central government standing firm against bailouts, debt defaults are inevitable.
China’s Renmin University released a report on local financial condition earlier this year, saying that local governments are now facing unprecedented financial stress—the deterioration of the revenue structure in the past two years, uneven financial resources between regions, the expansion of rigid expenditure demand, the widened gap between fiscal expenditure and revenue, and the rapid increase in local borrowing to address the gap problem….