China deepens financial partnership with Russia – intelligence

According to Ukrinform, Ukraine's Foreign Intelligence Service stated this on its website.

The debt problem of China's local authorities is rapidly worsening and is becoming one of the main systemic risks to the country's economy. Unlike the central government's sovereign debt, it is regional and municipal liabilities that are increasingly undermining China's financial stability.

In 2025, municipalities' infrastructure debts amount to about CNY 60 trillion (48% of GDP), with another roughly CNY 40 trillion accounted for by direct regional debt. Servicing these obligations is increasingly carried out through new borrowing via bond issuance.

The situation is further complicated by the downturn in the real estate market. For many years, up to half of local budget revenues were generated through the sale of land plots for development. The collapse in real estate demand has led to a sharp drop in land prices and a reduction in regional revenues, forcing local authorities to sink even deeper into a debt trap.

At the same time, the officially reported CNY 100 trillion in debt represents only part of the real picture. There are also so-called "hidden debts", the liabilities of quasi-state infrastructure and municipal companies for which local authorities effectively act as guarantors. Estimates suggest their volume could reach another CNY 50 trillion, raising the total debt of local governments to 150 trillion CNY, or about 120% of China's GDP.

In January–February 2025 alone, China's local authorities issued bonds worth CNY 1.7 trillion, or approximately $240 billion.

These are unprecedented volumes, indicating a growing dependence of regions on debt financing in the short term.

"China's debt problem is structurally more complex than that of the USA, as the yuan is not a fully convertible currency. This limits Beijing's ability to shift the debt burden to the outside world. In this situation, China is increasingly using Russia as an ad hoc economic and financial partner, in particular to ensure resource security, alternative payment mechanisms, and geopolitical maneuvering without taking on long-term commitments," the Foreign Intelligence Service noted.

As Ukrinform previously reported, Russia sharply increased gold exports to China in 2025.

Photo: AA