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People's Daily Online>>China Politics

Govt debt 'safe, controllable', premier says

By Wei Tian (China Daily)

08:09, January 31, 2012

BEIJING - China's government debt is at an "overall safe and controllable" level, said Premier Wen Jiabao, who pledged that funding for key projects would be ensured and steps would be taken to gradually digest the risks.

"Through clean-ups and regulation, the trend of expanding investment vehicles has been effectively contained," Wen said.

Wen's comments, reported in the People's Daily on Monday, were made in a speech at the Central Financial Work Conference in early January.

The National Audit Office said earlier this month it had uncovered 531 billion yuan ($83.8 billion) in irregularities involving local government debt, which amounted to 10.7 trillion yuan as of the end of 2010.

The scale of China's local debt has aroused concerns among investors, and some fear that defaults would cause a chain reaction and threaten the stability of the country's banking system.

But Wen said the majority of local debt was in the form of "high-quality assets", such as infrastructure, that had healthy cash flow and promising returns.

Wen warned against a simple approach of hitting the brakes on local debt and called for gradual solutions to the problem. "We must avoid turning local risks into comprehensive, systemic risks," he said.

Meanwhile, the funding needs of key construction projects approved by the government, such as affordable housing projects, must be ensured, he said.

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