China’s Finance Minister Lan Fuan announced significant measures to increase the debt limit and support local authorities in managing risks.

State Council Press Conference

On October 12, the State Council Information Office held a press conference with Finance Minister Lan Fuan and other officials. The focus of the meeting was ‘strengthening countercyclical adjustment of fiscal policy and promoting high-quality economic development.’

Debt Reduction Strategy

The initiative to increase the debt limit marks the strongest measure in recent years to support debt reduction. The government also plans to issue special bonds aimed at recapitalizing large state-owned commercial banks.

Implications for Local Authorities

Lan Fuan stressed the importance of addressing local government debt risks for the sustainable development of China's financial system. Since 2015, the Ministry of Finance has been issuing local bonds to replace existing government debt, successfully bringing cities such as Beijing, Shanghai, and Guangdong to zero implicit debt.

China's new measures underline the government's determination to maintain economic stability and reduce debt obligations on the local level.