China is bailing out over $1 trillion in unpaid local government debts to private firms

China is preparing a major bailout to clear over $1 trillion in unpaid bills local governments owe to private companies, according to ￰0￱ plan involves getting China Development Bank and other state-backed lenders to fund local authorities so they can finally repay massive backlogs tied to contractors, suppliers, and state-linked ￰1￱ will push debt risk deeper into the banking sector, while Beijing tries to ease pressure on the private ￰2￱ plan to roll out the first phase of this cleanup with 1 trillion yuan, around $140 billion, with everything meant to be settled by ￰3￱ delayed payments became a central issue after President Xi Jinping raised alarm in a February speech, which was later released to the ￰4￱ said the long-overdue arrears were hurting businesses and society, adding that these debts could “cripple” companies and weaken trust in local ￰5￱ warning triggered urgency across key ministries and banks to find a fix, ￰6￱ told to lend despite rising bad loans Over the past few months, China’s top regulators have told major banks to help fund the repayments, even if the loans come with ￰7￱ banks have been directed to provide short-term cash to local governments, not directly, but to the government-backed firms under them that owe money to private ￰8￱ though those debts aren’t officially on the books of the local governments, they’re still responsible for covering them, since they guarantee the firms behind the debt.

That’s creating problems for bankers who are already struggling to protect their ￰9￱ lenders, especially the top five commercial banks, have been dealing with rising defaults for ￰10￱ just the first half of this year, they put aside 3.51 trillion yuan to cover expected loan losses. That’s nearly a 6% jump from the end of last ￰11￱ the same time, their profits have been crushed by years of state pressure to issue low-interest loans to keep the economy moving. A person familiar with the banks’ internal discussions said that bankers are uneasy about the new orders. They’re asking for protection from regulators, in case the bailout loans go ￰12￱ a safety net, some fear they’ll be held responsible for future ￰13￱ levels hit 10 trillion yuan as bond sales begin David Li Daokui, an economist, estimates that local government-related entities now owe 10 trillion yuan , or about $1.4 trillion, to both companies and civil ￰14￱ debt equals 7% of China’s GDP from last ￰15￱ shows how far the financial rot has spread, not just between governments and banks, but into payrolls and the country’s core ￰16￱ ease the load, Caitong Securities ￰17￱ that the government might issue 200 billion yuan in special bonds this ￰18￱ funds will help cover overdue payments through land reserve and construction ￰19￱ bond sales alone won’t solve the ￰20￱ government is relying mostly on banks to step in, even if they don’t want ￰21￱ real burden, once again, is shifting from broken local governments onto national ￰22￱ this time, the bill is being paid with even more ￰23￱ it works or not is still unclear, but China is running out of time, and ￰24￱ Difference Wire : the secret tool crypto projects use to get guaranteed media coverage