Also, does it ultimately matter with an economy as productive as China's? Other commenters are comparing it with Detroit, which has lost most of its tax base, so I'm not sure that's a fair comparison.
And, if they are state run funds/bond issuing, than isn't it roughly equivalent to any other kind of monetary stimulus? (genuinely asking, this isn't my area of expertise)
It seems like a lot of Chinese cities have equal to or greater debt than Detroit. How bad this is depends on the tax base of said cities and how the debt is structured, but it’s eyebrow raising at best.
As far as I understand, a lot of valuation of the risk in muni bonds is based around the assumption that municipalities won’t go bust together at once. It’s this way in the US. This let’s someone spread their money safely, in theory.
The Chinese economy is so export and manufacturing dependent, it wouldn’t surprise me to see a lot of cities go bust together at once if the economy shrinks. They have very little other economic activity to fall back on.
For my part, I think any good usage of debt requires transparency about the amount and purchase. Any entity, private or public, that tries to hide its total debt load is suspect at best. I would expect such an entity to have other hidden debts, and possibly be leveraged to an insane degree, hence the privacy.