No 'outburst' of local debt problems
By Zhang Fengming |
July 22, 2011, Friday
|
Print Edition
Print Edition
CHINA can avoid an "outburst" of local debt problems because the risks "are still under control," Jia Kang, head of the Ministry of Finance's research institute, said yesterday.
"The auditing body's disclosure of China's local government debt assured that the local debt risks are still under control," Jia said in a commentary published in the overseas version of the People's Daily yesterday.
Jia rebutted the "China collapse theory" based on speculation about local government debt as completely sensational hypotheses.
China's local government debt totaled 10.7 trillion yuan (US$1.65 trillion) in 2010, and bank loans took up 80 percent, the National Audit Office said in a June report.
Rating firms, including Moody's and Standard & Poor's, have raised red flags on the issue as they warned that the massive debts could trigger a rebound in non-performing loans.
Besides the debts that the government has direct liabilities for, the 10.7 trillion yuan debt also includes those that the government has guarantee liabilities and those that may need government aid once defaults occur. But Jia pointed out that doesn't mean all of them will turn into real local government debt. He also noted it doesn't mean there is no problem but a systematic risk can be ruled out.
China's banking regulator said on Wednesday that it will boost oversight of loans to local government financing vehicles and property-related credit in smaller cities in the second half of this year. Banks should control the risks of new loans tied to the financing vehicles via "strategic cooperation" with local governments, stronger management of land-backed lending and accurately weigh risks based on actual cash coverage of projects, the China Banking Regulatory Commission said.
"The auditing body's disclosure of China's local government debt assured that the local debt risks are still under control," Jia said in a commentary published in the overseas version of the People's Daily yesterday.
Jia rebutted the "China collapse theory" based on speculation about local government debt as completely sensational hypotheses.
China's local government debt totaled 10.7 trillion yuan (US$1.65 trillion) in 2010, and bank loans took up 80 percent, the National Audit Office said in a June report.
Rating firms, including Moody's and Standard & Poor's, have raised red flags on the issue as they warned that the massive debts could trigger a rebound in non-performing loans.
Besides the debts that the government has direct liabilities for, the 10.7 trillion yuan debt also includes those that the government has guarantee liabilities and those that may need government aid once defaults occur. But Jia pointed out that doesn't mean all of them will turn into real local government debt. He also noted it doesn't mean there is no problem but a systematic risk can be ruled out.
China's banking regulator said on Wednesday that it will boost oversight of loans to local government financing vehicles and property-related credit in smaller cities in the second half of this year. Banks should control the risks of new loans tied to the financing vehicles via "strategic cooperation" with local governments, stronger management of land-backed lending and accurately weigh risks based on actual cash coverage of projects, the China Banking Regulatory Commission said.
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