Chinese legislators call for efforts to control local govt debt

BEIJING - Chinese legislators on Thursday urged intensified efforts to keep local government debt under control, warning against potential default in the future.

Legislators made the comments when attending a panel discussion of the ongoing bi-monthly session of the National People's Congress (NPC) Standing Committee, which started on Monday.

A report submitted to the session reveals that local government debt risk is controllable overall.

However, statistics show potential risks are looming as the debt ratio of some provincial governments has surpassed the level of 100 percent.

More than 100 municipal governments and 400 county governments also reached that level.

Chen Zhu, vice chairman of the NPC Standing Committee, said he was worried that some local governments may face de facto bankruptcy in the future.

Chen's view was shared by other legislators including Liao Xiaojun, who warned incompetence in handling local government debt would lead to systemic risks.

Legislators said measures such as deepening fiscal and tax policy reform to give local governments more revenue and hold those who borrow illegally accountable should be taken.

Local government debt has expanded substantially since 2008, when the central government issued a package of measures including increasing public investment and easing monetary policy to tackle challenges from the global financial crisis.

Noticing potential risks, China took legislative measures to put the brake on ballooning local government debt.

According to the amended Budget Law, which took effect this year, and a State Council regulation, a cap should be placed on the local government debt balance, and the amount of local government debt should be submitted by the State Council to the NPC for approval.