The Chinese government's leading think-tank has released a new study downplaying concerns about the level of debt being held by local governments, suggesting that more spending needs to take place to cope with social issues.
On the heels of a report issued to the National People's Congress this past week, the Chinese Academy of Social Sciences is out with its own analysis of China's local debt situation.
In it, CASS economist Li Yang argues there is no concern about a local debt crisis.
"Ever since the global economic crisis began in 2008, China's debt ratio has been climbing at a high speed. The three indicators, including sovereign assets, sovereign debt and net-public debt, are all on a rising curve. But if you look at Chinese local debt in a more objective way, you have to come to the conclusion that China doesn't have debt crisis. Numerous years of debt accumulation is why we're at the debt ratio we're at."
Last week's report to the NPC Standing Committee says local government debt in China sits at 86-percent of GDP, which the government says remains below its alert line of 100-percent.
To ensure that debt doesn't continue to skyrocket, the central government has taken a number of steps to ease the burden on local governments, including allowing them to convert part of their debt into low-yield bonds.
With that in mind, the Chinese Academy of Social Sciences is also advocating more spending this coming year to deal with social issues.
CASS researcher Zhang Xiaojing says money is going to have to be spent to fulfill a promise made by President Xi Jinping in the new 5-year economic plan.
"The most important task during the next five-year plan is pulling 70-million people out of poverty. The second is narrowing the income gap between the rich and the poor. Though a lot of work has been done to figure it out, the results aren't quite there yet. On top of this, we also have to deal with the rising concern about youth unemployment. Of course, environmental protection is also one of the tough calls."
The new report by the Chinese Academy of Social Sciences also proposes some solutions to the environmental problems the Beijing-Tianjin-Hebei area is coping with at present.
Director of the Institute of Industrial Economics, Huang Qunhui, says one of the ways to deal with pollution is through a better integration of the region's industries to make them more efficient.
"The industrial differences among Beijing, Tianjin and Hebei are large. The dominant industry in Tianjin and Hebei is ferrous metal smelting, rolling and processing. In Hebei, steel production makes up one-third of its industrial base. This industry is notorious for creating air pollution. Beijing's dominating industrial sector is auto making, followed by computer manufacturing."
Researchers suggest that by better integrating industries in the region through a more advanced transportation network, emissions will be brought down, as will the costs associated with complying with environmental standards.