Malinvestments aside, the Bills Come Due for China's Local Governments.
For decades, local governments in China borrowed heavily to build urban infrastructure, helping to fuel the country's red-hot economic growth. Now, they are under pressure to pay the bill, adding another financial worry to Chinese policy makers' list.
Independent economists estimate that China's municipalities have racked up more than $6 trillion in debt—including debts authorities don't acknowledge on their books. Tax revenue and returns on the roads and other infrastructure built with borrowed money aren't enough to pay down the debts. Land sales, which local governments have relied on, have weakened as the economy slows.
With nearly 3 trillion yuan ($428 billion) in bonds coming due in the next two years, on top of bank loans and hidden debt, local governments need to find ways to refinance.