China poll sees local debt as future problem

August 19
9:20 AM 2013

China's local debt is the biggest challenge that the country would be facing in the future, according to 63% of a recent poll's respondentsof a recent economy poll. Conducted by China's Xinhua News Agency and Xiamen University, the survey's respondents consisted of 43 senior economists coming from the government and the academe.

The general consensus was that China will be facing major challenges caused by building government debt, congestion, and a swelling property bubble. 

One of the economists who took the survey, Liu Xiahui, said,  "The reality is that local governments, the major debtors in this country, have disturbed the country's financial market."   He also added that if the country does not find a system for local governments to shell out for their expenditures without borrowing, their dues will only become a major drawback.

Even with restrictions imposed, local governments organized financial instruments to help finance their projects from 2009 until 2010. In 2011, the government closed down issuance of debt to local governments as the country experienced economic recovery.  

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