Editor's note: Zhang Deyong is a researcher at the National Academy of Economic Strategy (NAES), Chinese Academy of Social Sciences (CASS). The opinions expressed in this article are the author's, and not those of CGTN.

Preventing and resolving hidden local government debt risks is critical to balancing development and security, regulating local government financing, and promoting high-quality economic growth.

Since the implementation of China's comprehensive debt resolution package, local governments and relevant departments have made steady progress in carrying out the decisions and arrangements of the central authorities. These efforts underscore a clear governance principle: enforcing full and rigorous Party self-governance to ensure accountability and regulate the exercise of power, while strengthening oversight and constraints to ensure that local governments perform their duties in accordance with the law, make sound and democratic decisions, and curb the emergence of new hidden debt risks at source.

Strengthening political accountability and making debt governance a key priority in party discipline

As the Communist Party of China (CPC) continues to advance full and rigorous self-governance, preventing and resolving debt risks has become a serious political responsibility. Addressing hidden debt risks is not only about correcting irregularities in local government financing, but also about rectifying distorted performance incentives and lax discipline.

In recent years, China has stepped up enforcement against hidden debt violations. Cases involving newly incurred hidden debt or ineffective debt resolution have been investigated and dealt with as they arise, creating a strong deterrent.

Tightening oversight to close gaps in debt management and regulate the exercise of power

A central tenet of full and rigorous Party self-governance is to ensure that public power is exercised in accordance with rules and remains subject to institutional checks and oversight. In recent years, disciplinary inspection and supervision bodies have worked in tandem with fiscal regulators to strengthen constraints on the exercise of power and tighten controls over government borrowing.

These efforts are helping break with the past practice in some localities of making arbitrary decisions and borrowing heavily to expand investment and infrastructure projects. Oversight of decision-making has been strengthened, approval procedures for government investment projects and the allocation of fiscal funds have been tightened, and unauthorized borrowing and guarantees have been firmly curbed. The aim is to bring local government financing fully within a law-based and rules-based framework.

Resolving debt through development and promoting development through debt resolution

Debt resolution must go hand in hand with development. Under this year's budget, China has allocated 4.4 trillion yuan ($660 billion) in new local government special-purpose bonds, primarily to support major projects, replace hidden debt, and settle government arrears to businesses and other creditors.

These figures show that debt resolution is not simply a matter of shrinking balance sheets. Rather, it is intended to free up fiscal capacity and create room for growth. By making effective use of special-purpose bond proceeds, local governments can ease near-term debt repayment pressures while providing tangible financial support for major projects. This approach balances the need to sustain growth with the imperative to contain risks, helping create a more stable macroeconomic environment for high-quality development.