Mar 26, 2013
Translated by Li Jing

On Mar 24, Lou Jiwei (樓繼偉), the new minister of the Ministry of Finance (MOF), said at the China Development Forum (中國高層發展論壇) that the MOF is investigating local government debts. The MOF will distinguish the 11 trillion yuan debt counted by the National Audit Office (審計署) as explicit debt, implicit debt or direct liability, and then analyze each category in order to draw up measures to stop the dangerous trend of debt expansion in local governments.

The international rating agency Moody's Investors Service warned that the slow growth of fiscal revenue has an adverse effect on the credit of local governments in China, making them expand the scale of borrowing through special financing methods.

Dr. Chang Li (常麗) of the MOF’s Institute for Fiscal Science Research (財政科學研究所) explained the problem saying, "In recent years, local governments and relevant administrative institutions owed a large number of construction debts on vanity projects, which is not reflected in budget accounting statements. So the implicit debt and the project debt of local government and administrative institutions is emphasized in this survey done by MOF.”

The EO learned that by the end of 2012, some counties had mortgaged real estate projects through the government’s investment and financing platform in order to pay for urban public construction.

Dong Dasheng (董大勝), a representative of the CPPCC and the Deputy Auditor of National Audit Office, said in the congress that local governments should be seriously limited on construction liabilities.

Lou Jiwei said the next step will be to study and improve the system and open the gate for local governments to abandon construction liabilities.

Links & Sources
Sina -財政部調研地方隱性債務：先以11萬億為基礎