China issues contingency guidelines for managing local government debt woes
- Donald Trump Sworn in as 45th U.S. President
- Wall Street ends higher as Trump becomes president
- Walgreens Boots Alliance (WBA) Said to Face Antitrust Concern for Rite Aid (RAD) Fix - Bloomberg
- Bristol-Myers Squibb (BMY) Says It Won't Pursue Accelerated U.S. Regulatory Pathway for Opdivo Plus Yervoy in Lung Cancer
- Apple (AAPL) Sues Qualcomm (QCOM) Over Patent Royalties in Antitrust Case - Bloomberg
Get inside Wall Street with StreetInsider Premium. Claim your 2-week free trial here.
BEIJING (Reuters) - China's State Council on Monday published rules on contingency guidelines for managing local government debt problems, as part of measures to resolve fiscal and financial risks and maintain economic safety and social stability.
In recent years, Beijing has imposed tight controls on new local government debt issuance to help ward off financial risks, following a borrowing binge since the global financial crisis.
The guidelines, specifying for the first time four types of "debt risk events" and corresponding emergency responses, sent out "clearer warning signals" to local governments, who must think about how to pay back their debts before borrowing, state news agency Xinhua said in a commentary.
The worst kind, or "first degree" debt risk event, is exemplified by one of five conditions, such as when a provincial government fails to make a bond principal and interest payment, the central government said in a statement.
The statement, published on its website, also detailed three other levels of debt risk events, based on less severe conditions, such as a lower percentage of bond payment defaults.
Local governments take full responsibility for paying debts through emergency measures such as cutting investment, making use of government funds, selling assets and adjusting budgets, and the central government will stick to the principle of no bailouts, it added.
City- and county-level governments are obliged to adopt fiscal restructuring when debt conditions worsen, for example if annual general debt payments exceed a tenth of the spending budget.
Fiscal restructuring must not hamper provision of basic services but can include sales of state-owned assets. Local governments finding it tough to balance budgets can seek help from the provincial government, the Ministry of Finance said.
The document also set out specific terms to hold local governments liable for borrowing, spending and managing debts illegally.
China capped the rise in outstanding local-government debt at 17.2 trillion yuan in 2016, up from 16 trillion in 2015, excluding bonds issued under a debt swap scheme. The finance ministry said China's local government debt is under control and its debt burden would not show a big change this year.
(Reporting by Yawen Chen and Elias Glenn; Editing by Clarence Fernandez)
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- FBI Director Comey, who angered Democrats, gets hug from Trump
- Thousands join anti-government protests in Romania over proposed law reforms
- Suspect in Boston police car propane attack arrested
Create E-mail Alert Related CategoriesReuters
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!