China's Bold Move: Trillion-Yuan Debt Swap Initiative

China plans to allow local governments to issue 6 trillion yuan in bonds to manage hidden debts over three years. This measure, approved by the National People's Congress, aims to mitigate local debt risks through a strategic swap, addressing off-balance sheet liabilities.

In a significant financial maneuver, China will permit local governments to issue bonds worth 6 trillion yuan over the next three years. This initiative is designed to tackle off-balance sheet or "hidden" debt, an official announced on Friday.

During a recent meeting from November 4 to 8, China's top legislative body, the standing committee of the National People's Congress (NPC), sanctioned a bill that raises the limits on local government debt. Xu Hongcai, vice chairman of the financial and economic affairs committee of the NPC, provided the information.

Speaking at a Beijing press conference, Xu noted that this debt swap strategy is aligned with efforts to mitigate local debt risks, reinforcing the nation's financial stability. ($1=7.1533 Chinese yuan renminbi)

(With inputs from agencies.)