China says local gov’t debt risk controllable

%3CP%3E%3CFONT%20face%3DVerdana%3EChina%20said%20on%20Monday%20the%20default%20risk%20of%20its%20local%20government%20debt%20is%20%22controllable%20overall%2C%22%20while%20it%20urged%20strict%20checks%20over%20new%20debts%20that%20are%20potentially%20unsafe.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3ELocal%20governments%20as%20a%20whole%20have%20the%20ability%20to%20repay%20their%20debts%2C%20but%20some%20districts%20and%20industries%20are%20financially%20weak%20and%20potentially%20risky%2C%20the%20Ministry%20of%20Finance%20said%20in%20a%20statement%20on%20its%20website.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EThe%20evaluation%20came%20after%20the%20disclosure%20of%20massive%20local%20government%20debts%20aroused%20concerns%20over%20the%20sustainability%20of%20China%27s%20impressive%20economic%20growth.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3ELocal%20government%20debt%20totaled%2010.72%20trillion%20yuan%20%281.66%20trillion%20U.S.%20dollars%29%20at%20the%20end%20of%202010%2C%20the%20National%20Audit%20Office%20announced%20in%20June.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EThat%20amount%20equaled%20about%2026.9%20percent%20of%20China%27s%20gross%20domestic%20product%20%28GDP%29%20in%202010%2C%20Deputy%20Finance%20Minister%20Li%20Yong%20was%20quoted%20in%20Monday%27s%20People%27s%20Daily.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EThe%20ministry%20acknowledged%20some%20particular%20local%20governments%20have%20relatively%20high%20debt%20compared%20with%20their%20financial%20capabilities.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EIn%20some%20cases%2C%20governments%20rely%20too%20heavily%20on%20revenue%20from%20land%20sales%20to%20pay%20their%20debts%2C%20while%20in%20other%20areas%20debt%20pressure%20is%20exceptionally%20high%20for%20highway%20projects%2C%20colleges%20and%20hospitals%2C%20according%20to%20the%20ministry%27s%20statement.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EEffective%20measures%20must%20be%20taken%20to%20properly%20handle%20the%20existing%20debt%20in%20risky%20areas%2C%20and%20industries%20and%20new%20debt%20must%20be%20strictly%20controlled%2C%20it%20said.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3ELocal%20governments%20are%20only%20allowed%20to%20issue%20a%20limited%20amount%20of%20bonds%2C%20making%20financing%20vehicles%20a%20significant%20tool%20of%20fund-raising%20as%20authorities%20crave%20capital%20to%20build%20roads%2C%20bridges%20and%20other%20infrastructure%20projects.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EThe%20huge%20amount%20of%20debt%20was%20accumulated%20over%20a%20long%20period%20during%20which%20the%20default%20rate%20has%20been%20relatively%20low%2C%20the%20ministry%20said%20Monday.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EIt%20said%20local%20governments%20can%20improve%20their%20repayment%20abilities%20with%20increasing%20revenue%20from%20the%20country%27s%20rapid%20economic%20expansion.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EThe%20liquidation%20of%20fixed%20assets%2C%20land%20and%20other%20resources%20owned%20by%20local%20governments%20can%20also%20help%20pay%20back%20their%20debts%2C%20according%20to%20the%20ministry%27s%20statement.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3ETaking%20into%20account%20local%20government%20debt%2C%20treasury%20bonds%20and%20bonds%20issued%20by%20policy-based%20financial%20institutions%2C%20China%27s%20public%20sector%20has%20an%20overall%20debt-GDP%20ratio%20of%20around%2050%20percent%2C%20below%20the%2060-percent%20alert%20line%2C%20said%20Deputy%20Finance%20Minister%20Li%20Yong.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EHe%20said%20efforts%20to%20put%20local%20governments%27%20financing%20vehicles%20in%20order%20have%20made%20%22positive%20effects.%22%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EThe%20ministry%20on%20Monday%20pledged%20to%20divest%20some%20financing%20vehicles%20of%20their%20fund-raising%20businesses%20and%20commercialize%20others%20by%20drawing%20private%20investment.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EIt%20ordered%20local%20governments%20not%20to%20guarantee%20the%20debts%20of%20other%20institutions%20or%20enterprises%2C%20and%20said%20a%20debt-financing%20system%20should%20be%20developed%20for%20local%20governments.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3E%3C/FONT%3E%26nbsp%3B%3C/P%3E