Plan to tackle local government debts published
November 21, 2016 Category Finance, Weekly
China has published an emergency plan for local government debt risks. The four-grade emergency plan, which could mean “fiscal rebalancing” on the part of local governments, is a precautionary arrangement, said experts. The plan is like a barrier against risk, said Zhao Quanhou, Director of the Financial Research Office of the Research Institute for Fiscal Science at the Ministry of Finance. Total local government debt in China stood at CNY16 trillion at the end of 2015 with a 38.9% debt-to-GDP ratio, lower than the 60% alert line of the European Union and other major economies. City and county governments will fiscally rebalance if their annual interest payments on general debt are 10% higher than their public spending budgets, or if interest on special debts is 10% above their government fund budgets.
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