ECONOMY

Exclusive: China to Create Department to Tackle Trillions in Local Government Debt

Published: Sep. 29, 2025 6:39 p.m. GMT+8, Updated: Sep. 29, 2025 6:39 p.m.

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China’s Ministry of Finance (MOF) is set to establish a dedicated department to oversee government debt, elevating the management as a multi-year campaign to defuse local government debt risk enters a critical phase, Caixin has learned.

The new debt department will be created by converting the ministry’s existing policy research department, sources close to the ministry and local finance department officials told Caixin.

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China’s Ministry of Finance will set up a dedicated department to oversee government debt, led by Li Dawei, converting an existing policy research unit.
The move is part of a national plan to eliminate hidden local government debt by June 2027; hidden debt dropped to 10.5 trillion yuan by end-2024.
The new department will also manage 30.8 trillion yuan in special-purpose bonds, facing asset quality and transparency concerns.

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Who’s Who

Yuekai Securities Co. Ltd.: Yuekai Securities Co. Ltd.'s Chief Economist, Luo Zhiheng, has highlighted a concern regarding China's local government debt resolution. He noted that the annual debt-resolution quota might not align with actual debt maturity schedules, which could lead to potential cash-flow pressures.

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What Happened When

Mid-2023：: China launched a national deleveraging plan targeting local government debt.

By end of 2024：: Outstanding hidden local government debt fell to 10.5 trillion yuan, a reduction of 3.8 trillion yuan from a year earlier, according to MOF data.

By end of June 2025：: More than 60% of local government financing vehicles (LGFVs) had been removed from the official list, indicating their hidden debt was cleared, as disclosed by Finance Minister Lan Fo’an.

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