China plays down concerns of USD 1.7 trillion debt

Playing down concerns over USD 1.70 trillion debt by the local governments, Chinese Premier Wen Jiabao today said the loans are at a safe level but they will be "strictly controlled" in future.

China's debt-to-GDP and budget deficit-to-GDP ratios are at a fairly low level, and lower than many developed countries and newly emerging economies, he said.

Wen told a press conference that in 2010 the volume of local government debts stood at 10.7 trillion yuan (USD 1.70 trillion). The figure only increased by 300 million yuan by the end of 2011, he said. The Premier, however, did not make any mention about the USD 1.07 trillion debt of the central government.

On March 6, Yang Kaisheng, President of the Industrial and Commercial Bank of China, said the debt by the local and central governments amounted to about 17.5 trillion yuan (USD 2.78 trillion), about 43% of the country's gross domestic product. "We will take the local government debts very seriously, and we will not allow it to adversely affect China's development," Wen said.

The majority of government debts is high quality assets, with stable cash flows and promising returns. The debts of some projects can be repaid by their returns, according to Wen. Wen called for making market play a role in handling local government debts in ways of asset disposals, transfers of projects and selling of equities.