Risk in local govt debt 'well under control'

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Most of the new lending to local government funding vehicles in 2013 went to projects that are in their final phase, according to the China Banking Regulatory Commission. Provided to China Daily

Precise amount of outstanding regional authority loans unknown

The risk element of local government funding vehicles is well under control, said Shang Fulin, head of the China Banking Regulatory Commission in an interview with CCTV on Friday.

Shang said in general the risk exposure of lending to local governments is small because most of the loans are long-term and contained by effective regulations and controls.

It is possible that there will be defaults on some lending to local governments. The commission will classify the lending and take various measures to manage it, said Shang.

By the end of June, outstanding loans via local government funding vehicles stood at 9.7 trillion yuan ($1.57 trillion), up 6.2 percent year-on-year. The growth rate was 9 percentage points lower than the average growth rate for all categories of banking loans, according to the commission's data.

The growth of lending to local government projects slowed, while non-lending funding to local government funding vehicles increased, according to the commission's data.

"Most of the new lending to local government funding vehicles in 2013 went to projects that are in their final phase. As the total amount of lending increases, low efficiency of the use of funds and a lack of solvency may be observed," a note from the commission released on Friday said.

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