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China’s local governments swap debt for data as pressure builds to relieve burdens
- Chinese state entities have begun to explore using their data as intangible assets, reducing debts and opening new possibilities for relieving burdens
- Analysts warn plan has not been thoroughly evaluated, with inconsistent valuations of data and potential legal issues yet to be resolved
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China’s most indebted local governments have seized on a novel method to relieve some of their burdens – turning vast stores of data into credits on their balance sheets. The unusual approach, tested in certain localities and covering a small share of their total obligations, raises legality and sustainability questions even as it presents an enticing escape route.
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Beijing has stepped up its supervision of local governments over the past two years, as a prolonged downturn in the property market and enormous pandemic control expenditures have weighed down regional finances.
Analysts said with land sales no longer providing the revenue they once did, intangible assets like data might help some local governments inject life into their ledgers. But assets of this type are generally more difficult to assess when it comes to financing.
Last year, China approved an updated set of accounting rules that allows companies to include data resources as either “intangible assets” or “inventories” in their financial statements.
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China’s Ministry of Finance said that corporate data could be classified as intangible assets provided they meet certain accounting standards, and data held for sale in daily business activities could be included in inventory.
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