China to boost local gov't debt clean-up
时间：2012-03-02 07:35:50
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BEIJING, March 1 (Xinhua) -- China will boost the clean-up of thousands of millions of local government's debt in 2012, so to guard against possible defaults that would hurt its banks, the country's banking1 regulator said Thursday.
The country will focus on cleaning up old loans made to local government financing vehicles (LGFV) while
tightening2 new debt issues and raising cash to debt
coverage3 ratios, China Banking Regulatory Commission (CBRC) said on its website.
The CBRC will
strictly4 control the use of LGFV loans, while giving priority to key projects that are under construction, it said.
The regulator will also improve risk monitoring and reclassify LGFV loans to relieve pressure from banks.
Local government debts had risen to 10.72 trillion yuan (1.7 trillion U.S. dollars) by the end of 2010,
accounting5 for about 26.9 percent of China's gross domestic product, according to data released by the National
Audit6 Office.
Analysts7 fret8 that if a certain proportion of the loans have gone sour, it will push up non-performing loan ratios in the banking industry and threaten banks' credit ratings.
Local governments typically invested the money they borrowed in building
infrastructure9. They also faced huge
repayment10 pressure in 2011 and now also in 2012.
China's banks had 9.1 trillion yuan of outstanding loans issued to LGFV as of Sept. 30, 2011, the Shanghai Securities News reported last month, saying at least 65 percent of these loans were
fully11 covered by cash flows.
The nation's local government debt is overall safe and controllable,
Premier12 Wen Jiabao said in the country's financial work conference at the beginning of this year.
Revenues and
expenditures13 via the LGFV will be included in the government's budget management while a
mechanism14 will be established to control the gross local government debts through a risk-warning arrangement, Wen said.
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