Bloomberg reports that according to economists at Goldman Sachs Group Inc., China’s hidden local government debt has swelled to more than half the size of the economy. 

The total debt of local government financing vehicles rose to about 53 trillion yuan ($8.2 trillion) at the end of last year from 16 trillion yuan in 2013, the economists wrote in a report. That’s equal to about 52% of GDP and is larger than the amount of official outstanding government debt. Goldman’s calculation is based on an analysis of more than 2,000 LGFVs’ statements of their interest-bearing debt, including bonds and bank loans. 

The LGFVs are a tool for governments to borrow money without it appearing on their balance sheets, but it is seen as the same as a government liability by financial markets. 

There were some signs earlier this year that government was making inroads in cutting this debt as the economy’s rebound gave room to focus on tackling financial risks. Now with growth facing more headwinds including reluctant consumers, a housing market crisis which has caused demand for land to slump, power shortages, and supply chain disruptions, markets are looking for signals of a rethink of that hawkish policy stance.

Land sales are a major source of revenue for local governments and sales have slowed down as the crisis at property developer China Evergrande Group worsens. To make up the funding gap left by shrinking land sales revenue, Goldman recommended the government increase the bond quota for 2022 by more than 500 billion yuan from this year’s level of 3.65 trillion yuan.