Even as China posted a 2.3 per cent growth in 2020—one of the few countries to have managed to do so amid the Coronavirus pandemic, its former finance minister Lou Jiwei said that China's fiscal situation 'extremely severe'. Lou said the Covid 19 induced global economic slowdown, China’s own ageing population along with rising domestic debt levels have become a cause for concern.

Lou was China’s finance minister between 2013 and 2016. According to the South China Morning Post (SCMP), the former minister said that the country’s fiscal revenue was expected to be stuck at a low level in the coming five years, with no sign of the government cutting back its spending.     

“The fiscal difficulties are not only a near-term or short-term issue, but also will be serious in the medium term,” SCMP quoted Lou as saying.

China’s debt level has been steadily rising. Another report published last month by the news organisation noted that the Chinese state owned firms registered a default of $11.1 billion — 51 per cent of all defaults last year. The Hong Kong based newspaper said that this was “the largest default total for state firms since China first allowed onshore bond defaults in 2014, according to data published by the government linked think tank National Institution for Finance & Development (NIFD).

Lou also warned that the “emerging market countries are facing a double blow to both their economies and finances, with the economic risk transforming into fiscal and financial risks, raising the risk of a debt crisis.”