Exclusive | China’s spiralling local government debt still out of control, says outspoken lawmaker
Senior official at the National People’s Congress says efforts to rein in borrowing are more cosmetic than an effective solution to the problem
China’s local government borrowing remains a serious risk to the country’s financial security, according to an outspoken lawmaker.
The warnings from Yin Zhongqing, deputy director of the financial and economic affairs committee at the National People’s Congress, the country’s legislature, came as Beijing is trying to reassure the world that it has largely defused the local government debt bomb after swapping over 8 trillion yuan (US$1.15 trillion) worth of local government debt into bonds.
Yin told the South China Morning Post that China’s approach to address local government debt was more cosmetic than an effective solution to the problem. There are still 17,000 so-called local government financing vehicles or commercial entities controlled by local authorities across the country and every single one is incurring debts that ultimately will be repaid by the government, Yin said.
“Bonds issued by such vehicles, despite being a form of corporate bonds, are just hidden debts of local governments and it’s hard to root out [such borrowings],’ said Yin.
China’s former finance minister, Lou Jiwei, pinned great hopes on these forms of public-private partnerships to raise funds, but Yin said many of the programmes were just “deformed local government borrowings”.
