Three Years of Debt Resolution: Nationwide LGFV Debt Growth Slower Than Social Financing, but Shandong, Zhejiang Still Face Pressure
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According to a research report by Tianfeng Securities, China's local government debt swap bonds issued as part of the three-year debt resolution program have reached approximately 11.7 trillion yuan as of August 2026. This includes special refinancing bonds, special bonds for replacing hidden debt, and special new special bonds. The report analyzes provincial-level data, finding that while national urban investment (city investment) interest-bearing debt grew at a compound annual rate of 6.05% from 2023 to 2025, below the 8.14% growth rate of total social financing, some provinces face greater difficulty in reducing debt. Provinces like Shandong, Zhejiang, Fujian, and Xinjiang, despite receiving significant swap bond allocations, still saw high debt growth rates above the national average, indicating difficulty in debt reduction. In contrast, provinces such as Jiangsu, Hunan, and Sichuan achieved relative debt reduction. The report also notes that Ningxia in the 12 high-risk provinces saw high debt growth, and some provinces like Sichuan and Jiangsu showed increased debt growth in the first half of 2026, warranting further monitoring.
Source report
1. Total Issuance of Replacement Bonds
As of August 2026, the cumulative issuance of replacement bonds under the current debt resolution program has reached approximately 11.7 trillion yuan.
The fiscal support funds for this round of debt resolution consist of three categories:
- Special Refinancing Bonds: Approximately 2.2 trillion yuan, intensively issued since Q4 2023
- Special Bonds for Replacing Implicit Debt: Approximately 5.9 trillion yuan, issued at 2 trillion yuan per year from 2024 to 2026
- Special New Special Bonds: Approximately 3.6 trillion yuan
These three categories are collectively referred to as "replacement bonds" in this analysis.
Distribution by Province
12 Key Provinces (total issuance: 4,426.7 billion yuan, ~38% of national total):
- Over 500 billion yuan: Guizhou, Tianjin, Yunnan
- Over 300 billion yuan: Liaoning, Chongqing, Inner Mongolia, Guangxi
- Over 200 billion yuan: Jilin, Heilongjiang, Gansu
Non-12 Provinces (total issuance: 7,223.2 billion yuan, ~62% of national total):
- Over 1 trillion yuan: Jiangsu (1,233.2 billion yuan, the only province exceeding 1 trillion)
- Over 500 billion yuan: Hunan, Shandong, Sichuan, Henan
- Over 300 billion yuan: Hubei, Anhui, Zhejiang, Shaanxi
2. Provinces Where Urban Investment Debt Is Harder to Reduce
From 2023 to 2025, the compound annual growth rate (CAGR) of nationwide urban investment interest-bearing debt was 6.05%, compared to an 8.14% CAGR for total social financing (TSF) stock. The lower growth rate of urban investment debt relative to TSF indicates that, overall, debt is on a reduction trajectory.
Classification Criteria
- "Relative Reduction": Provincial CAGR of urban investment interest-bearing debt (2023–2025) < 8.14%
- "Harder to Reduce": Provincial CAGR ≥ 8.14%
Key Regional Observations
Regions with High Replacement Bond Issuance (Non-12 Provinces) but Still Hard to Reduce
These include Shandong, Zhejiang, Fujian, and Xinjiang:
| Province | Urban Investment Debt CAGR (2023–2025) | Replacement Bond Issuance (billion yuan) | Coverage Ratio | |----------|----------------------------------------|------------------------------------------|----------------| | Shandong | > 9.0% | 589.3 | 15.7% | | Fujian | > 9.0% | 293.8 | 20.3% | | Zhejiang | 11.1% | 415.2 | 6.4% | | Xinjiang | 13.9% | 255.0 | 38.1% |
Regions with High Replacement Bond Issuance (Non-12 Provinces) and Relative Reduction Achieved
These include Jiangsu, Hunan, Sichuan, Henan, Hubei, Anhui, and Shaanxi:
- CAGR below 5%: Hunan, Henan, Anhui, Shaanxi
- Jiangsu: 6.6%
- Sichuan: 6.4%
Within the 12 Key Provinces
Most regions achieved an absolute decline in interest-bearing debt from 2023 to 2025. However, Ningxia recorded a high CAGR of 11.5%, with growth concentrated in 2025.
Year-by-Year Trends in Hard-to-Reduce Regions
- Shandong, Zhejiang, Fujian: Sustained high growth in both 2024 and 2025
- Xinjiang: Notably high growth in 2024
- First Half of 2026: Zhejiang continued to show high growth; Fujian and Xinjiang showed declining trends
Additional Watchlist: Regions with Rising Growth in H1 2026
Some regions that previously achieved relative reduction have shown higher growth rates in the first half of 2026. These warrant attention as replacement bond issuance nears completion, particularly:
- Sichuan
- Hubei
- Jiangsu
Source
天风研究Eastern
Part of this Story
China’s 6 trillion yuan local debt swap nears 98% completion; focus shifts to LGFV operating debt