Cracking down on hidden debts before they become greater risks

The Ministry of Finance recently made public eight typical cases of local government's accountability for hidden debts it has investigated since 2022, stressing that such cases will be investigated whenever detected, and investigation intensified.

The central authorities have focused attention on defusing local debt risks. The central financial work conference held at the end of October said the country will establish a long-term mechanism for preventing and defusing local debt risks and a government debt management mechanism compatible with high-quality development, and optimize the structure of central and local government debts.

For a long time, hidden debts have held a considerable share in local debts and because of low transparency, these debts are often easy to accumulate and form greater debt risks.

On the one hand, hidden debts are not conducive to the effective supervision and management of the real local debts by the State. On the other hand, if hidden debts are not contained, they will create new debts "while efforts are made to defuse old debts", seriously incapacitating the country's efforts to defuse the debt risks. That is why the central authorities have repeatedly stressed that no local hidden debts should be created, and the Ministry of Finance has publicly exposed such cases on several occasions.

The exposure of the eight cases of illegal creation of new hidden debts involving 46 billion yuan ($6.32 billion) sends a strong signal that the central authorities are tightening their debt governance. The public exposure of these cases not only shows the strength of accountability for illegal hidden debts, but also sounds the alarm for hidden debt creation models, especially those that risk violating the law.

The lifelong accountability system established by the top authorities for the hidden debt problem is by no means empty talk. Under the current financial pressure and economic development environment, all local governments should foster a clearer sense of the financial redline, promote the transformation of their past "political show" perspective, and avoid living beyond their means by creating new local debts.