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Maekyung | Local Language | News | Nov. 6, 2025 | UndeterminedFinancial System Problems

The Chinese government has established a new Debt Management Department within the Ministry of Finance to centralize and directly control local government bond issuance. This move aims to prevent excessive local government debt from causing economic instability and regional fiscal imbalances by consolidating debt management responsibilities that were previously split among multiple departments.

The new department will oversee national and local government bond issuance limits, repayment management, foreign debt operations, and inspections of hidden debt. Unlike the previous system, where local governments could autonomously increase borrowing through investment companies despite a central approval process, the Ministry of Finance will now have full control over approvals and limit-setting, reflecting a shift toward centralized debt governance.

This reorganization aligns with the Chinese Communist Party’s directive to manage local government debt risks actively and steadily. As of the end of the previous year, China’s total government debt stood at 92.6 trillion yuan, including 47.5 trillion yuan in local government debt and 10.5 trillion yuan in hidden debt, with a debt-to-GDP ratio of 68.7%. The Debt Management Department’s initial focus includes sorting out hidden debt by June 2027 and restructuring low-profit public investment companies.

The Ministry of Finance is also advancing a debt restructuring program to convert short-term, high-interest debt into long-term, low-interest bonds, under the continuous supervision of the new department. While this centralization is expected to enhance management efficiency, it will reduce fiscal autonomy for local governments.