The Ministry of Finance said Thursday that risks of China’s local government debts are controllable and measures are being taken to prevent any increase in hidden debts.
The debt balances of both China’s central and local governments are within the legal limit, Minister of Finance Liu Kun told a press conference on the sidelines of the annual legislative session.
The debt balance of local governments stood at 18.39 trillion yuan (about 2.74 trillion U.S. dollars) at the end of last year, well below the official ceiling of 21 trillion yuan, official data showed.
The local debt ratio was 76.6 percent last year, significantly lower than the international warning line of 100 percent to 120 percent, while the total government debt ratio, taking into account the debts of central government, came in at 37 percent, also far from the alert level of 60 percent set by the European Union, Liu said.
“Given the figures, the government debt risks China faces are very low,” he said.
China is “very serious” about hidden debts, and prohibits the debt-raising practices of local governments that disregard solvency, Liu said.
The ministry will take a sound approach in handling existing debts, strictly prevent illegal borrowing, and ensure that no systemic risks will emerge, Liu said.
Liu said China sticks to principle that the central government will not offer bail-out and the borrower is responsible for the debt.
A market and law-based mechanism has been established to deal with debt defaults, the minister said, calling the progress in reducing existing debts positive. me