Limit for local government debt
Print Edition
CHINA has imposed a limit on local debt, as it tries to control massive borrowing by its regions.
The Standing Committee of China’s National People’s Congress has approved a ceiling of 16 trillion yuan (US$2.5 trillion) in local debt for this year, Xinhua news agency reported.
The total for 2015 is made up of the 15.4 trillion yuan in local government debt outstanding as of the end of last year and 600 billion yuan deemed the limit localities can take on in additional borrowing this year, Xinhua said.
A new budget law and a government directive earlier stipulated that China should limit the local government debt balance and that the size is subject to approval by the NPC after submission by the State Council, Xinhua said.
China is trying to transform its economic model away from debt-fuelled investment projects and make consumer spending the driver of growth.
Fitch Ratings said in a statement the move showed “a commitment by authorities to bolster the borrowing framework for local governments as part of a broader debt reform initiative.”
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