By Richard Johnstone in Rome | 12 November 2014
China took action to limit local government borrowing in response to worries over the risks presented by the debt, a senior finance ministry official has revealed.
Speaking to the World Congress of Accountants, Yu Weiping, the assistant minister of the Ministry of Finance, said the country was implementing a number of fiscal reforms in response to lessons it has seen from the impact of the economic crisis on other countries.
He told delegates in a session on enhancing government transparency and accountability that the country’s ‘comprehensive agenda’ to modernise was intended to increase openness and transparency.
‘This is part of the prime minster [Li Keqiang]’s promise to modernise our government system and capacity but is also a very important lesson we have learnt from the oversees sovereign debt crisis,’ Yu said.
Among the elements of the plan are moves to limit local government borrowing after concerns were raised about the viability of this debt. It was announced last month that China would introduce a cap on municipal borrowing, which is estimated to amount to around 30% of the country’s gross domestic product.
‘Our plan is to establish a comprehensive and well-regulated, transparent and modern budget system to ensure the sufficient oversight of the government.
‘What is more, to better safeguard against debt risks, we have prescribed restrictions on local government borrowing. The result is better measurement and evaluation of debt risks, and of the emergency response system and the capacity system.’
Yu also said the China had now entered what he called ‘a new normal period’ of medium to high growth while also attempting to rebalance the economy.
‘In the first three quarters of this year our GDP grew by 7.4%, he added.
‘Our economic performance is within the normal range and positive signs are emerging.
‘For example, our economic structure is now more optimal, and the service sector plays more positive a role. What is more, the indicators on unemployment and energy conversation are better than expected.’
