CHINA-INTERNAL: ECONOMY

In an editorial on June 20, China's leading influential financial magazine Caixin commented on the recent emergence of cases of local government employees in China demanding overdue wages and said this has caused widespread concern. It said most of them have the same root cause: the uncovering of local government debt risk, and the subsequent financial restructuring. Caixin commented that the multiple cases of local debt risk that have been exposed are testing the firmness of the central government’s strategy and urged that the central government must not slacken in its effort to bring order to local government debt, and must not waver in its resolve to avoid bailouts. In particular, it must avoid providing “hidden” assistance. This is the first step to breaking local governments’ expectations of rigid repayment, and to setting hard budget constraints for governments at all levels.





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