Urban Debt: Local Debt Concerns, Who Will Take the Risk?

Over time, the problem of urban indebtedness in mainland China has become more and more worrisome.

By the end of 2022, six regions had debts above the 50% threshold, including Guizhou, Tianjin, Jilin, Gansu, Hainan and Qinghai.

In particular, Qinghai Province's debt ratio is as high as 84.3%, ranking first in the country.

However, the rise in debt ratios is not only related to the backwardness of regional development, each of the country's 31 provinces and cities faces a debt problem, even major economic provinces such as Chongqing, Jiangsu and Guangdong.

Debt is closely related to the industrial development of the region.

Underdeveloped areas such as Guizhou and Jilin are prone to debt problems.

Due to the lack of diversification of the industrial structure and excessive reliance on traditional industries, these regions have limited fiscal revenue growth and are difficult to effectively alleviate the debt pressure.

However, debt is not entirely bad.

Reasonable indebtedness can drive economic growth and social development.

For example, with debt financing, local governments can accelerate infrastructure construction, promote industrial upgrading, and promote employment.

However, an appropriate gap needs to be maintained between debt ratios and regional GDP.

Too much unnecessary investment, such as over-reliance on real estate, can lead to increased indebtedness.

Despite the growing problem of indebtedness, local managers often talk only about economic development rather than debt.

This is because they want to maintain a stable public opinion environment, attract investment and consumption, and thus promote economic growth.

However, this strategy may obscure the truth about debt risk, creating potential risks for local governments and the socio-economy.

In the face of urban indebtedness, measures should be taken to address it.

First of all, local governments should strengthen fiscal management, optimize the debt structure, and increase fiscal revenue.

Second, it is necessary to strengthen the supervision of local governments' borrowing and financing behavior to reduce unnecessary debt risks.

At the same time, local governments should be encouraged to promote economic growth and improve debt repayment capacity through diversified industrial layout and innovative development models.

The most important thing is to strengthen information disclosure and supervision, improve society's awareness of the problem of urban debt, form public opinion pressure, and promote the solution of the problem.

The problem of urban debt is not only a problem of local governments, but also a common challenge for the whole society.

Only by accurately understanding the situation and causes of the debt problem and taking effective measures to solve it can we ensure the sustainable development of the local economy and the long-term stability of society.