Hainan Debt Troubles

The housing bust is pushing local governments to the edge of solvency, with Haikou asking to have access to one-third of the province's local debt quota.

Chinese Official Downplays Debt Risk as Haikou Pleads for Relief
The governor of China’s tropical Hainan Island downplayed the risk of financial trouble after the province’s capital city said it might not be able to pay its debt and made a plea for help.

“I am confident in debt repayment at all government levels in Hainan,” Hainan Deputy Governor Mao Chaofeng said on the sidelines of the Bo’ao Forum on the island Friday. “I don’t think there will be a risk.”

Mao’s reassurances contrasted with a Feb. 4 letter from the political advisers of Haikou and posted on government website that said the city’s debt had “already exceeded the alarming line.” It said revenue would be flat and asked that the regional government allocate a third of its bond issuance quota to the city.

“It’s basically impossible for us to pay government debts with our own financial resources,” the advisers wrote in the letter.

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