BEIJING: China’s local government financial situation is likely to improve as the economy rebounds this year, though debt risk for some authorities is high and repayment pressure is large, Minister of Finance Liu Kun says.
The world’s second-largest economy after that of the United States is stabilising after the lifting of Covid-19 containment measures last year, with manufacturing activity expanding at the fastest pace in more than a decade in February.
“We have urged some local governments to take the lead, resolve risks associated with government debt and maintain the bottom line in order to avoid systemic risk,” Liu said at a news conference in Beijing.
The liability ratio of statutory debt last year was about 50%, a relatively low level by global standards, Liu said.
“The main issue regarding local debt is its uneven distribution. Debt risk for some local governments is relatively high and pressure to repay debt is large,” the minister said.
Local governments have long been a pump prime for growth, but declining state land sales revenue has severely eroded their financial power, a situation exacerbated in 2022 by feeble economic growth, weak tax income and crippling Covid-19 curbs. Amid a protracted property crisis, government land sale revenue slumped by 23.3% in 2022.
Liu said the impact of the declining state land sales revenue on local government financial expenditure was controllable.
China will expand financial spending in an appropriate manner this year and arrange the size of local government special bonds reasonably to drive up investment, Liu said.
An annual parliamentary meeting beginning this weekend is widely expected to produce a 2023 economic growth target and policy strategy. — Reuters
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