Mind The Red Ponzi—Next Comes A Minsky Moment With Chinese Characteristics

Efforts to deleverage the “hidden time bomb” of 40 trillion in local government debt have gained urgency after the government recently pledged to cut taxes by two trillion yuan ($300 billion), further draining local coffers and adding to the possibility of missed repayments. Meanwhile, the lack of official estimates of the total local government debt load – S&P’s CNY40 trillion estimate is just that – which usually carries higher rates than on-book ones, makes the issue even trickier.