Local Govt Debt Situation Deteriorates

Moody's: Chinese regional and local government debt update shows credit- negative rise in leverage

Moody's Investors Service says that statistics released on Chinese regional and local government (RLG) debt show a worsening of the RLGs' credit metrics, such as their debt-to-GDP and debt-to-revenue.

On 29 August 2015, China's (Aa3 stable) National People's Congress released the State Council's update of debt statistics for RLGs. The update -- the first since the last release for figures as of June 2013 -- shows that in the 18 months between June 2013 and end-2014, RLG debt rose by more than one-third to RMB24 trillion ($3.7 trillion) from RMB17.9 trillion.

The RMB24 trillion was equivalent to 38% of the country's GDP in 2014.

Credit always looks good right before the credit cycle turns and it deteriorates until the economy recovers or defaults reduce debt levels.