Regulators Answer Questions 10 Trillion Local Debt Three Major Issues

In recent years, the problem of local government debt has attracted the attention of the international and domestic society. With the audit department finding out the basic situation of the 10 trillion yuan local debt, more attention has been focused on how to further prevent risks.

Recently, the relevant officials of the Ministry of Finance and the China Banking Regulatory Commission were targeted at

What is the overall situation?

According to the results of the Audit Commission, as of the end of 2010, the balance of the local government debt was 10 trillion and 717 billion 491 million yuan, of which 62.62% of the government's debts were repaid, 21.8% of the government's liabilities or 21.8% of other liabilities.

At the provincial level, municipal level and county level, the proportion of government debt accounts for 29.96%, 43.51% and 26.53% respectively. According to the regional perspective, the balance of government debt in 11 provinces (municipalities) and 5 cities in the eastern region accounted for 49.65%, 23.06% in the central 8 provinces, and 27.29% in the western 12 provinces (autonomous regions and municipalities).

The head of the Ministry of Finance said that for many years, local governments had passed the measure.

"Local governments provide important support for promoting the improvement of people's livelihood through debt financing."

The head of the Ministry of Finance said that as of the end of 2010, local governments at all levels had invested 1 trillion and 375 billion 312 million yuan in education, medical care, science and technology, affordable housing, agriculture, forestry and water conservancy construction, and so on, which effectively promoted the development of social undertakings. In addition, 5 trillion and 946 billion 689 million yuan had been invested in pportation, municipal infrastructure and energy construction, and promoted economic and social development and improvement of people's livelihood.

What is the risk situation?

According to the audit results, China's local government debt risk is generally controllable.

From the scale of debt, by the end of 2010, the ratio of debt repayment liabilities to the comprehensive financial resources of local governments, that is, the debt rate that is liable to repay, is 52.25%.

If the debt with security liability is converted into the government's debt paying responsibility, the debt rate is 70.45%, less than 100% of the warning line.

From the perspective of debt structure, China's government debt is mainly domestic debt. At the end of 2010, the creditor of local government debt was mainly domestic institutions and individuals. Local government debt was accumulated over the years. Over the past 30 years, local governments have improved their solvency through their own economic development and financial growth, and their debt repayment conditions have been improving.

From the perspective of debt repayment, besides the financial revenue, our local governments have more realizable assets such as fixed assets, land and natural resources, which can enhance solvency through realizable assets.

In addition, China's economy is in a period of rapid growth. Infrastructure construction has created room for growth in local economy and government revenue, and is conducive to improving its debt repayment conditions.

China Banking Regulatory Commission (CBRC) responsible person said that in the first half of this year, the CBRC will strive to promote the withdrawal management of local government financing platform loans, contract correction, additional collateral, increase provision and raise capital occupation costs.

The head of the Ministry of Finance said that we should see that the debt paying ability of some areas and industries is weak and there are potential risks. For example, the debt burden of individual local governments is liable to pay debts. The debt repayment in some places is more dependent on the income of land pfer.

For some regional and industry risks, we need to take precautions, take effective measures, properly handle the stock debt, strictly control new debts, and prevent and resolve possible risks.

How to further prevent risks?

In order to effectively prevent the risk of local government debt, the state has promulgated a series of measures in recent years. In June 2010, the State Council specially issued a notice to comprehensively deploy the management of local government financing platform companies from various aspects, and all relevant departments have also regulated the financing platform of local governments from the aspects of insurance and risk control.

The head of the Ministry of Finance said that the Ministry of finance is actively working with relevant departments to strengthen local government debt management.

First, properly handle debt repayment and follow up financing for in construction projects.

The source of repayment mainly depends on the public welfare of financial funds in construction projects. In addition to laws and regulations of the State Council, it is not allowed to continue financing through financing platform companies. We should guide the social capital to solve the problem of construction funds through the financial budget and other channels.

Second, we must continue to clean up and standardize the financing platform companies.

Some should divestiture the financing business after the implementation of debt paying responsibilities and measures, and no longer retain the function of financing platform; some should enrich company capital, improve governance structure, achieve commercial operation, and introduce private investment to improve shareholding structure.

Third, resolutely prohibit illegal acts of government guarantee.

Local institutions at all levels and schools and other public institutions and social organizations must strictly enforce the relevant provisions. They must not borrow money illegally and do not issue direct or covert security agreements such as letter of guarantee, letter of commitment, comfort letter, and so on.

Fourth, speed up the study and establish a standardized local government debt financing mechanism.

We should promptly study the establishment of a local government debt risk early warning mechanism, incorporate local government debt revenues and expenditures into budgetary management, and gradually form a local government debt financing mechanism that is compatible with the socialist market economic system, standardized management and efficient operation.