China Implements Measures to Address Local Government Debt Crisis

China has instructed state-owned banks to extend the terms, adjust repayment plans, and reduce interest rates on existing local government debt in an effort to mitigate debt risks and support the faltering economy. Local government debt in China has reached 92 trillion yuan ($12.58 trillion), representing 76% of the country's economic output. The debt restructuring measures aim to prevent defaults and ensure banks do not incur heavy losses. The People's Bank of China (PBOC) will also establish an emergency liquidity tool to provide short-term loans to local government financing vehicles (LGFVs). The move comes as China faces a deepening property crisis and mounting economic risks.