Since the beginning of 2025, China has continued to advance its local government debt restructuring efforts, with over 80% of the year’s RMB 2 trillion special refinancing bond quota for swapping hidden debt already issued. As of now, 15 provinces, including several high-priority regions, have fully completed their annual quota.
According to Alaric’s data analysis, by June 12, 2025, China had issued a total of approximately RMB 1.6676 trillion in special refinancing bonds aimed at replacing existing hidden debts—fulfilling 83.4% of the full-year RMB 2 trillion target. Monthly issuance data shows a significant slowdown in May, with just RMB 30.17 billion issued, down sharply from RMB 261.67 billion in April. February saw the highest monthly issuance to date at RMB 782.33 billion.
Provinces that have completed their 2025 quotas include Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia, Heilongjiang, Jiangsu, Zhejiang (including Ningbo), Fujian (including Xiamen), Guangxi, Chongqing, Tibet, Shaanxi, Qinghai, and Xinjiang. In contrast, progress in provinces such as Anhui, Yunnan, and Hunan has been slower, with only 38.8%, 40%, and 50.5% of their quotas issued, respectively.
The policy of issuing special refinancing bonds to replace hidden debt was approved by the Standing Committee of the National People’s Congress (NPC) in November 2024. It authorized a one-time increase of RMB 6 trillion in local government debt limits to be implemented over three years—RMB 2 trillion annually from 2024 to 2026. By converting hidden liabilities into legally recognized government bonds, the policy aims to significantly reduce interest burdens and free up fiscal resources for economic development and public welfare.
The disbursement of these funds has proceeded rapidly. The entire 2024 RMB 2 trillion quota was issued intensively in the final two months of that year. In 2025, the issuance of hidden debt replacement bonds began early, particularly among 12 high-risk provinces prioritized for debt restructuring. Data shows that six such provinces—Tianjin, Inner Mongolia, Heilongjiang, Guangxi, Chongqing, and Qinghai—have fully utilized their 2025 quotas. Meanwhile, other key regions such as Liaoning (including Dalian), Jilin, Gansu, and Ningxia have exceeded 90% completion. Only Yunnan and Guizhou have lagged behind, with progress at 40% and 65.7%, respectively.
Some economically large provinces with significant stockpiles of hidden debt received larger quotas. For instance, Shandong (including Qingdao), which has seen frequent defaults among local government financing vehicles (LGFVs) and drawn considerable market attention, received a yearly quota of RMB 125.5 billion—ranking just behind Jiangsu and Henan. As of June 12, Shandong had issued RMB 104.256 billion in refinancing bonds for debt replacement, achieving 83% of its annual target.
The November 2024 NPC decision also stipulated that from 2024 onward, an additional RMB 800 billion in special bond issuance limits would be allocated each year for five years to supplement government fund revenues specifically for debt restructuring. As the RMB 2 trillion in hidden debt swap bonds nears completion, issuance of new special bonds for debt relief has accelerated since May 2025. According to Enterprise Warning Tracker data, newly issued special bonds designated for “existing project construction or supplementing government fund budgets” totaled RMB 15 billion, RMB 65.54 billion, RMB 36.71 billion, and RMB 26.48 billion from January to April 2025, respectively. In May, the figure surged to RMB 98.66 billion, marking a new high for the year. As of June 12, a total of RMB 260.43 billion in such bonds had been issued in 2025.
Alaric notes that the pace of hidden debt replacement bond issuance is expected to slow in the second half of the year, with greater emphasis placed on how the allocated funds are being used. For example, officials in provinces such as Anhui have stated they will scrutinize how unutilized funds in municipalities with slower progress are being deployed—specifically whether they are genuinely used to settle hidden debts and repay final creditors, and whether the entire debt swap process is compliant and transparent.
Some analysts believe that with the bulk of debt-related bond issuance nearly complete and local tax revenues under pressure, the focus going forward will be on the liquidity strains facing local governments.