On the surface, this appears to be a bold and innovative step to alleviate local debt pressures and bolster private sector confidence. Yet behind it lies a harsher reality: China’s policymakers are still grappling with the country’s persistent local debt crisis. Compounding this, the surge in local debt issuance during the pandemic years has pushed local finances to the brink. While it may stabilize private sector confidence in the short term, it is a reminder that the local debt crisis remains a formidable obstacle. Without bold, structural reforms, the specter of hidden debt will continue to haunt China’s economy for decades to come.