“Since the Lunar New Year, I’ve been leaving the office at 10 p.m. almost every day, and I’ve even been working from home during the holidays.”

This statement by the head of the debt management division in a city in southern China provides the real backdrop to a recent report in the Economic Observer.

In the same article, he made an even more poignant remark.

“If I had a choice, I definitely wouldn’t want to work in the Debt Management Division. It’s a thankless job that requires a lot of effort, and the pressure is immense.”

While this may seem like a candid confession from a grassroots finance official, the more you read, the more you realize:

this section chief, who “wouldn’t want to go” to the Debt Management Section, has seen the other side of local debt resolution.

01 Most People Are Reluctant to Take on This Role

Local government debt is a critical issue that must be prioritized during the 15th Five-Year Plan period.

This head of the debt division has made an assessment of his work that is worth pondering repeatedly.

In local government work, debt serves as a pivotal link between finance and the financial sector.

This is not mere politeness; it carries at least three layers of meaning.

First, it serves as a hub for two-way transmission.

He put it very clearly himself: “We must not only prevent fiscal risks from spreading to the financial system, but also guard against financial risks from, in turn, impacting the fiscal sector.”

A single default on hidden debt could trigger a chain reaction among banks; a regional financial fluctuation, in turn, could backfire on local finances.

Across the entire country, only a handful of positions shoulder the responsibility for this “two-way” critical juncture, and the Debt Division is one of them.

Second, it serves as a hub for operational coordination.

Local government debt falls into two major categories: one is government debt, such as general-purpose bonds and special-purpose bonds; the other is debt held by state-owned enterprises and urban investment companies.

When it comes to the specific functions of the Debt Division, the division chief used the phrase “bundled coordination.”

Debt management bridges finance and industry, serving as a core lever of local governance. Grassroots debt departments juggle multiple roles—including policy implementation, risk prevention and control, and development support—with complex tasks and a broad scope of responsibilities.

The third level: the decision-making coordination hub.

The head of the debt section put it most plainly:

“Debt sections at the city and county levels not only bear management responsibilities but are also involved in a significant amount of macro-level work, such as formulating risk prevention strategies and ensuring alignment with government decisions.”

The combination of these multiple pivotal roles makes grassroots debt management positions the front-line battleground in local governance where pressure is most concentrated and responsibility is heaviest.

Looking back at that remark—“no one wants to go there”—it does not imply that the position is unimportant; rather, it speaks to the self-evident challenges and heavy burdens involved.

02 Debt Management Is Central to Fiscal Operations

Currently, not every locality has a “Director of the Debt Management Division.”

At the provincial level, the typical structure is a “Government Debt Management Division.” For example, the Government Debt Management Division of the Heilongjiang Provincial Department of Finance.

At the prefectural city level, some have merged this function into a “Finance and Debt Section,” while others have established a separate “Debt Section.” The head of this Debt Section is precisely the official responsible for separating debt management functions from relevant financial departments.

Whether to establish a separate Debt Section—that is, to manage government debt and the debt of state-owned enterprise financing platforms together—depends on actual needs.

What is even more noteworthy is a detail he highlighted:

“The establishment of the Debt Section was, on the surface, a response to the Ministry of Finance’s organizational restructuring to create a Debt Department; in reality, it was due to the dissolution of the local debt resolution office, with its personnel and functions being transferred in their entirety back to the Finance Bureau.”

This single sentence connects the two ends of the organizational changes in one go.

Looking upstream, in November 2025, the Ministry of Finance’s website was officially updated, listing the “Debt Management Department” under the “Ministry’s Administrative Organs.”

It comprises six divisions: the Comprehensive Division, the Central Debt Division, the Local Debt Division I, the Local Debt Division II, the Issuance and Redemption Division, and the Monitoring and Management Division.

This achieves “unified management of the three types of debt”—implicit debt (including municipal investment bonds classified as implicit debt) and statutory debt (government bonds and local government bonds)—strengthens implementation and effectiveness monitoring, ensures genuine debt resolution, and reduces the risk of debt spiraling out of control.

Looking further down the chain, the Debt Resolution Office—a temporary deliberative and coordinating body—began to be dissolved, with its relevant functions returning to the Finance Bureau; at the prefecture and city levels, separate “Debt Sections” were established to take over these responsibilities.

With the central government “elevating the division to a department,” provincial-level governments retaining “Debt Divisions,” and prefecture- and city-level governments establishing separate “Debt Sections,” a vertically integrated debt governance chain is taking shape.

The head of this Debt Section also emphasized the importance of his department’s role within local finance.

He noted, “Budget, treasury, and debt have become the core pillars of fiscal operations. These three divisions correspond to revenue, expenditure, and risk prevention and control, as well as to development, reform, and stability.”

In the past, debt management was a subsidiary function of budget work, tucked away within financial departments or budget sections and treated as a supporting role; now it has been elevated to a core pillar on par with budget and treasury, and from the central to the prefecture and city levels, dedicated units are being established and managed independently.

As we enter 2026, China’s debt resolution efforts have now reached the “deep waters” of the midpoint.

Two-thirds of the “6+4+2” comprehensive debt resolution policy package has been implemented, and the cumulative reduction in the nation’s outstanding hidden debt has exceeded 50 percent, marking substantial progress in risk mitigation.

This year’s Two Sessions also proposed “establishing a unified, long-term mechanism for government debt management,” emphasizing the principle of “unification”—that is, resolving debt while fostering development and fostering development while resolving debt. The current focus has shifted from “prevention and resolution” to “establishing a long-term mechanism.”

The head of the debt section further explained that contradictions in local debt management are currently prominent:

Land-based fiscal revenue continues to shrink, putting pressure on local fiscal revenue and leaving insufficient funds available for debt resolution;Reviews of special-purpose bonds have become stricter and yield requirements have risen, tightening local financing channels and intensifying the conflict between development and compliance; Central policies focus on macro-level guidance, while local governments must coordinate fiscal, financial, and industrial development efforts to balance maintaining operations, preventing risks, and promoting development—a task that is extremely difficult to implement in practice.

This analysis precisely pinpoints the real-world dilemmas currently facing grassroots debt governance.

On one hand, there are the mandatory requirements for establishing a long-term debt resolution mechanism; on the other, there is the objective reality of shrinking local revenue sources and narrowing financing options—where development needs and risk thresholds clash intensely.

In just a few words, this highlights how every task tests local governments’ ability to coordinate and their wisdom in execution.

03 New Constraints Reaching the Front Lines of Investment Promotion

If one reads this report merely as a lament that “life at the grassroots level is tough,” that would be a superficial interpretation.

For this head of the debt management section, every aspect of his work is extending new constraints to the front lines of investment promotion.

We see that the policy of not adding new hidden debt is treated as an “ironclad discipline.”

Judging from previously reported cases, some local governments have used various pretexts—such as financing platforms, service procurement, and PPP projects—to covertly add new hidden debt, employing increasingly sophisticated and deceptive methods.

Such behavior—circumventing or flouting the rules—essentially constitutes passive resistance to the Central Committee’s decisions and deployments, as well as a direct challenge to financial discipline.

The Ministry of Finance’s public exposure of specific entities by name sends a signal that could not be clearer:

Fiscal discipline is not a “rubber band,” and hidden debt is not an “interest-free loan.” For those who violate regulations by incurring debt for the sake of so-called political achievements, they must not only be “punished” but also “stripped of their titles.”

Now that the “zero-tolerance” policy of the Debt Management Division has already led to the successive accountability of deputy mayors and finance bureau directors, the old tactics of “promise-based investment promotion,” “empty-policy investment promotion,” and “state-owned enterprise construction on behalf of the government with the government providing a safety net” have essentially reached their end.

In June 2027, the deadline for urban investment platforms to “exit their platform roles” will arrive.

The key to a successful transformation for urban investment platforms lies in enhancing their independent debt-repayment capacity and accelerating the shift toward sustainable and diversified growth areas—transitioning from infrastructure construction agents to comprehensive land development platforms or investment holding platforms to strengthen their independent debt-repayment capacity.

As their status changes, the operational logic of industrial parks must follow suit. A consensus has emerged within the industry that three new pathways for the transformation of urban investment platforms are becoming increasingly clear: state-owned capital investment/operating companies, comprehensive urban operators, and industrial investment groups.

Urban investment enterprises are generally in a state of passive transformation; their market-driven self-sustaining capacity remains relatively weak, and the efficiency and quality of asset revitalization are insufficient.

For urban investment companies that have exited their platform roles, it is essential to strengthen financing capabilities. However, they must not focus solely on financing; they cannot merely concern themselves with where the money comes from, but must also manage where it goes and how it can circulate in a virtuous cycle around their business operations. They must coordinate cash flows from financing and investments to ultimately optimize operating cash flow.

This requires urban investment companies, after exiting the platform, to reflect deeply on their past experiences, make a concerted effort to break free from this reliance on financing pathways, integrate financing with investment, build a capital operations system, and establish a seamless investment and financing system aligned with the company’s positioning and business needs to provide capital support for its development.

The business environment now includes an additional hard metric.

The issue of overdue payments to enterprises has been formally incorporated into the debt management system for the first time.

The 2025 Government Work Report explicitly calls for the first time to “clear local government arrears owed to enterprises” and allocates an additional 500 billion yuan in special-purpose bonds specifically for this purpose.

In recent years, the volume of accounts receivable held by small and medium-sized enterprises has grown, payment terms have lengthened, and the phenomenon of “chain defaults” has become particularly prominent. These arrears include both inter-enterprise defaults and government defaults on enterprise payments.

Recently, a Politburo meeting noted that to address this challenge and intensify efforts to resolve government arrears to enterprises, measures would include allowing the issuance of new local government special bonds to clear these arrears.

Data from Enterprise Early Warning Platform shows that as of April 28 of this year, local governments had issued 182.6 billion yuan in new special-purpose bonds, with a portion of these funds allocated to resolving overdue payments to enterprises.

Many localities are stepping up efforts to resolve outstanding payments to enterprises, and arrears of 500,000 yuan or less have generally been cleared effectively.

For enterprises, this is positive news, but the underlying warning is also clear. When planning investments or accepting government contracts, enterprises need to more rigorously assess the local government’s progress in clearing arrears and its fiscal health.

Debt resolution progress is becoming a new factor in regional ratings and will also serve as the next hard indicator of the business environment. In Closing

At the end of the original article, the head of the debt management division offered a very measured remark:

“Policy formulation must take into account the practicality of implementation; potential deviations during the execution phase must be anticipated.”

This statement deserves serious attention.

The current debt management mechanism is still being refined. Policies must strike a balance between principle and flexibility, reconciling policy requirements with local realities, in order to effectively prevent risks and promote the stable development of local economies.