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China unlikely to undergo local govt debt crisis (3)

(People's Daily Online)

08:13, June 13, 2012

There is not a real basis for the rumor of "outbreak of risk in a large scale."

Someone said that among the 11 trillion yuan of local government debts, the expired debts will reach 17 percent, 11 percent and 9 percent respectively in 2012, 2013 and 2014, with the first debt paying peak arriving in 2012. In the case of the stringent regulation of the real estate and slowdown of economic growth rate, the local financial revenue from the land began shrunk and the debt paying ability will face greater pressure, which may lead to the debt crisis.

Bai said that the above statement that "the first debt paying peak will arrive in 2012" is not exact. In terms of the debt repayment period, 25 percent of debts need to be repaid in 2011, which is much higher than the 17 percent in 2012. The local governments have repaid over 2 trillion yuan in 2011 and newly increased debts are only 300 million yuan. Therefore, it can be said quite stable and smooth. Even if the fiscal revenue slows down in 2012, the expired debts reduced by nearly one third and it is unlikely to trigger the so-called "debt crisis." After 2013, the expired debts will reduce to about 10 percent and the debt risk will also continue to reduce.

Jia Kang said that China has taken various measures and firewalls to prevent from and eliminate the potential risk of local debts, including strengthening the state's financial strength and increasing the capital available for local governments and the cashable assets. For example, as a large amount of debts are got from the construction of key infrastructure, which can produce cash and earnings. The debts can be repaid through the earnings. Some other debts can be repaid through such ways as assets disposal, project transfer and right offerings.

It is sensational speculation and has not real basis about some foreign media's hyping that the Chinese government debts will outbreak collectively, Jia said.

Read the Chinese version at: 人民币国际化不是“大爆炸式改革”, Source: People's Daily, Author: Li Lihui

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