Author: Lynette Ong, University of Toronto

Could China become the next Greece? ‘Digging out of Local Government Debt’ was the headline of a recent article in Caixin, one of China’s most respected financial magazines. Over the last 18 months, we have been reminded of the dangerously high level of local government debt in China, which could potentially derail the country’s impressive growth path. Pundits abound. A frequently cited pessimistic estimate by Victor Shih at Northwestern University, puts the total close to 100 per cent of GDP.

Local government debt in China may be ballooning, but the concern that it is posing an imminent fiscal risk is wrongheaded. Read more…