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China to defuse its $13 trillion LGFV debt time bomb?

Local reports indicate policymakers may finally get serious about a solution to dangerous debt pile at upcoming Third Plenum

by William Pesek July 2, 2024July 4, 2024

China's yuan could be set for a significant appreciation against the dollar. Image: X Screengrab / SCMP

China’s leadership gathering later this month could be the moment policymakers devise to defuse the US$13 trillion time bomb imperiling Asia’s biggest economy.

Though China’s property crisis gets the headlines, debt troubles plaguing municipalities across the nation also require urgent action.

At issue is the explosion of local government financing vehicles (LGFVs) in recent years. Such debt, the vast majority of it the off-balance-sheet kind, now almost rivals China’s annual gross domestic product (GDP).