Just don’t call it a bailout
One of China’s most senior economic advisors thinks Beijing should assume some local government debt.
In a column published in the official newspaper of the political advisory body (CPPCC), Liu Shangxi – who ranks fourth on our list of the most influential government economic advisors (read our profile of Liu here) – wrote:
- “All local debts incurred by fulfilling mandates imposed by the central government should have their repayment responsibilities transferred upwards to the central government.”
What this means: Liu is proposing the central government take responsibility for obligations it initially imposed on local authorities.
Some context: In theory, there’s a clear line delineating the responsibilities of the central and local governments.
- Local governments are responsible for matters related to municipal affairs, while the central government oversees issues like diplomacy and national defense.
In practice, though, the central government is understaffed and often entrusts local governments with some of its work – but without providing them enough cash to take on these responsibilities.
- Case-in-point – during the Covid-19 pandemic, local governments loaded up on debt to meet the quarantine and lockdown demands of Beijing.
Get smart: Liu is trying to reframe the debate on local government debt in a politically palatable way, in order to resolve the issue.
- Beijing has adamantly refused to bail out local governments directly.
- Liu’s approach positions the central government as taking on its rightful responsibility for central mandates, not as rescuing local authorities.
Get smarter: Liu’s influential position suggests top leaders may listen to his ideas, but it doesn’t guarantee they’ll implement them.