China supports indebted regions with debt restructuring program

China has launched a major debt restructuring program for its local governments to tackle economic challenges. The government plans to issue bonds worth ten trillion yuan (around 1.3 trillion euros) over several years. These funds are intended to help local governments restructure their "hidden debt" and reduce risks in the financial system, as Finance Minister Lan Fo'an explained.

Hidden debt is a well-known problem in China, as local governments have often borrowed indirectly to finance infrastructure projects. This practice led to considerable risks, as the debt burden was often not visible in public financial reports.

Economic goals and challenges

The decision for the debt restructuring program was made at the end of the week of the National People's Congress Standing Committee meeting, which approved the measures. In view of a weakening economy, Beijing is aiming to achieve its economic growth target of around five percent this year. Several measures to support the economy have already been announced in recent weeks.

One major factor slowing economic growth is the crisis in the real estate sector, which once served as a growth driver. Consumer confidence has been impaired as a result, leading to low domestic consumption.

Labor market and trade conflicts

In addition, young people in particular are finding it difficult to find work. This is exacerbated by various trade disputes and tariffs, which have a negative impact on economic performance.