Chinese leaders promise basket of measures to fix local debt
Latest Politburo stance suggests Beijing may be ready to step in
Extent of Beijing39;s involvement closely watched by economists
Measures could involve state bank loans, special bonds

BEIJING, Aug 7 Reuters China39;s promised basket of measures to defuse local government debt risks is likely to include special bond issuance, debt swaps, loan rollovers, and something Beijing really loathes dipping into the central budget.

Local governments are fundamental to China39;s economy, with Beijing tasking provincial and city officials with meeting ambitious growth targets. But after years of overinvestment in infrastructure, plummeting returns from land sales and soaring COVID costs, economists say debtladen municipalities now represent a major risk to China39;s economy.

Chinese leaders last month pledged, without detailing, to help ease their debts, signalling worries over a potential chain of municipal debt defaults destabilising the financial sector.

Economists took that message as being more constructive than in April, when Communist Party leaders demanded strict control of local debts. The implication, they say, is that Beijing has realised it needs to urgently throw cash at the problem.

That could represent a major breakthrough in finding a way out of China39;s municipal debt crisis, with Beijing having for years demanded that local administrations sort themselves out.

The local debt problem is complex…