Date
24 October 2017
China's debt swap scheme allows heavily indebted local governments to exchange debt with low-interest loans from the central bank. Photo Internet
China's debt swap scheme allows heavily indebted local governments to exchange debt with low-interest loans from the central bank. Photo Internet

China boosts debt swap scheme by 1 tln yuan

China is allowing local administrations to issue a further 1 trillion yuan (US$161 billion) of bonds to help them pay off their massive debt.

Local governments have to pay 1.86 trillion yuan of debt this year, according to state news agency Xinhua.

Central authorities expect to save about 50 billion yuan in yearly interest payments with the new 1 trillion yuan debt swap, double the amount they initially approved.

The program allows heavily indebted municipal administrations to swap the debt with low-interest loans from the central bank.

It comes amid slowing economic growth.

In the first quarter, the economy grew 7 percent from the same period last year, the slowest pace in six years.

Local governments are grappling with 17.9 trillion yuan of debt, according to official data cited by the Wall Street Journal.

The bulk of this debt came from a massive stimulus program after the 2008 financial crisis when China moved to restart economic momentum.

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