China to tackle debt and property crisis

China will hold its twice a decade financial policy conference as it seeks to tackle ballooning local government debt and a property bubble that could cause a crisis in the world’s second largest economy


DEBT-TO-GDP RATIO	Central government debt	Other

Japan	375%
China	21% 282% 121 trillion yuan (U.S. $16.5tn)
U.S.	257%
Average	256%
developed
100 200 300 400


Local government debt 
Up from 62% in 2019 to 77% in 2023, while central government debt still low at 21% of GDP

54% 23% % of GDP

Total LGFV debt	$9tn			Assets: $18.9tn
Mostly owed to Chinese banks	0	Mainly land and infrastructure
					Country Garden Real Estate HQ, Foshan

Majority of debt issued by 3,000 Local Government Financial Vehicles (LGFVs)

Local government – tasked by Beijing with creating growth – over-invested in real estate

     
PROPERTY BUBBLE

Largest part of debt is in construction and real estate

Property sales
29%% of GDP

Value of China’s real estate: 550% of GDP

Downturn in property sector – accounting for 29% of GDP – will affect China’s growth

Over-building and falling prices have seen developers like Country Garden default on loans

  
1 Central government could take on debt – but Beijing averse to this

2 Banks could extend loans, reduce interest rates – but LGFV debt remains

3 Force LGFVs to sell off assets to pay debts – could crash real estate market in which many Chinese have invested
  

Source: CEIC, IMF, Bloomberg, Reuters 
Picture: Getty Images 
© GRAPHIC NEWS