Rolling lockdowns seriously dented household incomes, leading many to reduce spending, which in turn resulted in less tax revenue for local governments.
“China’s runaway local debt poses a serious threat to the country’s overall economic health and will weigh heavily on China’s still-nascent recovery,” said Singleton.
Debt that is backed by local governments but which doesn’t show up on their balance sheets could be much bigger.
That’s more than 20% higher than the estimate of 53 trillion yuan made by Goldman Sachs in 2021.
Their debt squeeze could pose a serious threat to China’s financial system, particularly to small regional banks.