China adopts local government debt ceiling

A clerk counts yuan bills at a bank in Huaibei, East China's Anhui province. [Photo/IC]

BEIJING - China's top legislature on Saturday imposed a ceiling of 16 trillion yuan ($2.51 trillion) for local government debt in 2015.

The decision was adopted at the close of the National People's Congress (NPC) Standing Committee bi-monthly session.

The 16-trillion-yuan debt consists of two parts, 15.4 trillion yuan of debt balance owned by local governments by the end of 2014, and 0.6 trillion as the maximum size of debt local governments are allowed to run up in 2015.

The 2014 debt balance surged over 40 percent from the end of 2013 H1, and valued 1.2 times of the final accounting of 2014 public budget, according to the statistics.

According to the Budget Law which took effect this year, and a State Council regulation, China should cap local government debt balance, and the size of local government debt should be submitted by the State Council to the NPC for approval.

Wang Dehua, researcher at Chinese Academy of Social Sciences, said the fast expansion of local debt was a result of former inaccurate statistics and the recent proactive fiscal policy as well as major infrastructure projects.

"The move will rein local government debt with law," said Ma Haitao, a professor at Central University of Finance and Economics, suggesting local debt budget shall be submitted to the NPC, and the disclosure system of government debt shall be improved.

The committee also revealed an estimated debt ratio of local government debt as 86 percent this year, within a risk range between 80 percent and 120 percent.

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