China’s local government financing platform debt pressure continues to rise, with several institutions estimating that around 2.81 trillion yuan in urban investment bonds were issued in the first half of this year, leading to negative net financing and increased debt repayment pressure. Various regions are carrying out debt restructuring actions at different paces, with debt extensions and asset replacements becoming more frequent. Public data shows that as of the end of last year, the outstanding urban investment bond debt was approximately 15.5 trillion yuan, and when estimated more broadly, it reaches around 40 trillion yuan, indicating the ongoing accumulation of financial risks at the local level.
Since the beginning of this year, the Chinese Ministry of Finance has repeatedly urged local governments to expedite the resolution of financing platform debts, emphasizing the prohibition of creating new hidden debts. However, according to reports from local media, urban investment companies in provinces like Guizhou, Yunnan, and Henan are still maintaining their debt repayment capabilities through asset injections, land mortgages, and government repurchases. Some regions are requiring platform enterprises to self-fund through “interest-first, principal-later” schemes to delay the pressure of debt repayments.
According to Wind Information statistics, the scale of urban investment bond issuances in the first half of the year was approximately 2.81 trillion yuan, resulting in negative net financing. Several provinces have recently held special meetings to complete the classification and disposal of some financing platforms by the end of the year. A report by “21st Century Economic News” highlighted that progress on debt restructuring in many regions is slow, with some areas maintaining their debt repayment capacity through extensions and refinancing; the progress of special debt issuances for refinancing is approaching ninety percent.
Official data indicates that as of the end of September 2025, the number of operational financing platform companies nationwide and the scale of financial debts decreased by 71% and 62% respectively compared to March 2023 figures (source: Xinhua News Agency, October 26, 2025, quoting a report by the Governor of the People’s Bank of China, Pan Gongsheng). While this reduction seems significant on the surface, market analysts point out that behind the decrease lies asset transfers, debt extensions, and a model where the government assumes liabilities.
In an exclusive interview with our publication, a former official from a provincial finance department, Mr. Wang, and an insider from an urban investment company, Ms. Liu, shared their perspectives. Mr. Zhang stated, “This year, the central government has stricter requirements on hidden debts. The specialized funds and personnel support for debt restructuring have been enhanced. However, with a noticeable decline in regional fiscal revenues and reduced land sales and local tax income, platform companies still rely on extensions and asset replacements to sustain themselves.”
Mr. Wang revealed that local governments are generally adopting phased write-offs and balance sheet transfers in their “debt restructuring” tasks, moving debts into urban investment or state-owned assets in certain regions to evade audit pressures. He remarked, “Lanzhou is mainly focused on reducing the debt figures on paper and ensuring balanced reports, but the actual repayment rates are not high. Many county-level finances are tight even to pay salaries, so they can only stabilize cash flow for now.” He added that there is a tendency for regionally oriented “digital debts” in implementation, where the reduction targets set by the central government often differ from actual expenditures.
Ms. Liu from a Guizhou urban investment company disclosed, “Our company had two debts due this year, but after coordinating with the local government, we managed to extend the repayment deadline to the fourth quarter of next year through government repurchase commitments and land mortgages; although it’s marked as ‘replaced’ in our financial statements, it’s essentially still in the extension phase.”
An academic researcher specializing in local finance, who preferred to remain anonymous, highlighted to journalists that the so-called “debt bookkeeping” in practice means shifting debts from explicit accounts to hidden platforms, allowing the region to temporarily pass higher-level assessments; yet, structural risks are left unresolved. They stated, “The substance of the local debt problem lies not in numbers but in cash flow. As long as fiscal revenues do not recover and the land market remains subdued, debts will continue to accumulate through covert channels.”
The scholar mentioned that in the short term, the central Chinese government is relying more on administrative supervision to stabilize public opinion and financial confidence, while the genuine restoration of local finances requires tangible economic growth support. They commented, “However, the recent so-called recovery is just to pacify the public; they dare not say that the winter is coming.”
Mr. Zhang, a former head of a financial department, pointed out that with stringent central debt restructuring requirements, the significant decline in regional revenues has led to cities in some areas resorting to the phenomenon of “debt restructuring by borrowing new to repay old.” He added, “Many local governments are using platform companies to maintain operations through land mortgages and asset injections, resulting in limited actual reductions in debt. Banks are now reluctant to provide loans.”
Researcher He Qiang (pseudonym), from the Institute of Finance and Economics at the Chinese Academy of Social Sciences, who is now retired, mentioned in an interview that financing platform problems have become the main source of local debt risks, especially in the central and western regions where asset returns are insufficient. Without additional financial support, the progress of debt resolution will continue to be constrained.
Market analysts believe that while actual defaults on urban investment bonds are relatively low, “hidden extensions” are widespread. Due to financial institutions being instructed to maintain local creditworthiness, certain debts, while not in default, have effectively entered into the phase of postponement and refinancing, merely maintaining apparent stability through accounting methods.