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Local gov't debt controllable after enhanced regulations

(Xinhua)

09:39, May 19, 2012

BEIJING, May 18 (Xinhua) -- A budgeting offical from the Ministry of Finance (MOF) said Friday that the debts of China's local governments are controllable after enhanced efforts to bring down default risks.

Li Cheng, deputy director of the budgeting department, said the trend of enlarging the credit that is provided to local government financing vehicles (LGFVs) has been effectively curbed, adding that the nation will take further steps to dissolve debt risks.

Li said the State Council, or China's cabinet, has been making efforts to improve the management of LGFVs since June 2010. Currently existing LGFVs are operating in accordance with market rules and banks have also improved management concerning loans to LGFVs, Li said.

Data from the nation's auditing authority showed that the collective outstanding debt of local governments amounted to 10.7 trillion yuan (1.7 trillion U.S. dollars) as of the end of 2010, and that the debt-repayment ratio of local governments stood at 70.45 percent.

Li said authorities will strictly control local governments' new debt and actively monitor local government debt.

As part of a pilot project aimed at curbing debt risks for cash-strapped local governments, China approved the cities of Shanghai and Shenzhen, as well as the provinces of Zhejiang and Guangdong, to issue bonds in November last year. The cabinet said earlier this week that the bond issuance trials will be continued this year.

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