China is said to be weighing a plan to allow local governments to issue local treasury bonds.
Sources said recently that the Ministry of Finance (MoF) planned to allow local governments to issue local treasury bonds, an effort to ease rising financing pressure of the latter.
Li Yang, vice president of the Chinese Academy of Social Sciences (CASS), said at a seminar in the afternoon on September 16 that local governments in the country would be allowed to issue local treasury bonds sooner or later and as long as they issued such bonds, credit rating should be granted on them. Entrusted by the People's Bank of China (PBOC), the central park, the CASS had begun investigating financial ecology of local governments across the country since 2004 and was busy with the sixth round one. The aim was to get known their real financial condition so as to lay foundation for related credit rating granting later.
He reiterated that together with China Credit Rating Co., Ltd., it had operated a credit rating mode for local governments for several years and the operation had been mature. The research team had simulatively estimated risk of local treasury bond issuing of 19 provincial-level administrative regions and the results were that Beijing and Guangdong Province saw the risk be the minimum while Jilin Province, Heilongjiang Province, Shanxi Province and Yunnan Province witnessed the risk be the maximum.
Liu Yuhui, a researcher at the CASS, disclosed that debts of local governments in the country was expected to have exceeded CNY 20 trillion in total. And according to a report the China Banking Regulatory Commission (CBRC), the top Chinese banking regulator, released for debts of them recently, the on-balance-sheet credits reached about CNY 9.7 trillion to CNY 9.8 trillion. That from the shadow banking system, cooperations between banks and trust firms, and so on was about CNY 13 trillion to 14 trillion and the figure from build-transfer projects of local governments was about CNY 6 trillion to CNY 7 trillion.
Feng Guanghua, chairman of China Credit Rating, pointed out that local governments across the country had a list of financing channels. However, the mode with financing platforms as main body, land reserves as mortgage, and bank loans as major capital resource had been proved not to be a sustainable one. The debt-paying ability of some regions was poor and that of some county-level governments in eastern coastal Chinese areas was even higher than that of some provincial-level governments in west and northeast China.
