China to impose ceilings to regulate mounting local debt

Chinese Prime Minister Li Keqiang on Thursday said risks would be strictly prevented and controlled by imposing ceilings and bringing it under budgetary management, allaying concerns over the mounting debt of local governments.

According to official media reports, local governments' debt was stated to be over USD 3.4 trillion last year which became source of concern as the provincial governments struggled to repay the huge loans. China's foreign debt amounted to USD 891.41 billion in 2014.

The government will establish a standardised mechanism for debt financing by local governments, which features both general debt and special debt, and to improve the market-based pricing mechanism for local government bonds, Li said in his report to China's lgislature, the National People's Congress.

The government will impose ceilings for local government debt and place local government debt under budgetary management for general public finance and government-managed funds, he said, in his work report submitted to the NPC as it began its annual 10 day session here today.

To contain fiscal risks, warnings will be given to regions where high risk is detected, and local governments will be urged to set up crisis management mechanisms and formulate contingency plans, according to the report.

A system for releasing information on local government debt will also be established, with regular public disclosures, it said. The country also promised to make appropriate arrangements for handling outstanding debts and follow-up financing for on-going projects.