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China to further regulate local government debt issuance and financing
May 3, 2017 / 11:53 AM / 5 months ago

China to further regulate local government debt issuance and financing

BEIJING (Reuters) - China will further regulate local government debt issuance and financing, six government agencies said in a joint statement on Wednesday, reinforcing recent steps to bolster financial risk controls.

China has taken aim at potential cracks in its financial system, ramping up regulatory checks with various high-flying officials calling for action against an alarming level of leverage.

In the statement, the government agencies, including the National Development and Reform Commission, the finance ministry, the central bank and securities and banking regulators, said China would push for a clearer boundary between local governments and their financing vehicles.

Local governments are strictly prohibited from injecting public assets into local government financing vehicles (LGFVs), or using expected land revenue as debt repayments for LGFVs, the statement said.

It also said LGFVs could not accept guarantees from local governments when thy issue debt, and authorities would strictly prohibit illegal debt issuance by local governments through public-private partnership projects.

The agencies ordered an inspection of local governments’ financing and guarantee situation to “fully correct irregularities” by the end of July, the statement, posted on the finance ministry’s official website, said.

Reporting by Yawen Chen and Kevin Yao; Editing by Shri Navaratnam and Nick Macfie

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