Local government debt reached 92 trillion yuan ($12.8 trillion), or 76% of economic output in 2022, up from 62.2% in 2019. Part of it is debt issued by local government finance vehicles (LGFVs), which cities use to raise money for infrastructure projects. The International Monetary Fund expects LGFV debt to reach $9 trillion this year.

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


Is fiscal responsibility more difficult to practice in China since most of the spending is done by local governments? Also, what mechanism allows China to practice fiscal responsibility at all level of governments? The quote seems to suggest that the central government doesn't play a role in this, especially at the local government level, so how does China manage it, and is it a lot more difficult to practice fiscal responsibility in China than in the U.S.?



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