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E-mail China.org.cn, November 25, 2024
Nanfang Daily, Nanfang Plus:
Mr. Lan mentioned that the MOF will increase support for local governments to defuse hidden debt risks. Could you brief us on what measures will be taken and the next policy plans? In addition, there are rumors from the market that there will be fiscal policy quotas of several trillion yuan, and you just mentioned that you will significantly increase the debt ceiling to replace existing hidden debts of local governments. Could you provide more details in this regard? Thank you.
Lan Fo'an:
Thank you for your questions. Preventing and defusing local government debt is a major issue related to development and security, and the sustainable development of finance. Since 2015, the CPC Central Committee has required the establishment of sound and standard mechanisms for local governments to secure financing, opening wider the "front door" for local governments to raise funds in compliance with the regulations, while barricading the "back door" of borrowing money via methods that are illegal and against regulations, resolutely curbing the scale and expansion of hidden debt, steadily defusing existing debt, and effectively preventing debt risks. The MOF, along with relevant departments, has resolutely implemented and adopted a series of measures, including issuing local government bonds to replace outstanding debt, establishing closed-loop management for local government debt, promoting Beijing, Shanghai and Guangdong, where debt risks are relatively low, to achieve zero hidden debt, carrying out pilot debt relief projects in counties and districts with relatively high debt risks, and jointly preventing and defusing hidden debt risks of financing platforms, and strengthening the management of government investment projects with relevant departments. Party committees and governments at all levels have conscientiously assumed their principal responsibility, established a multi-departmental collaborative mechanism, coordinated the management of debts and the prevention and relief of debt risks, actively paid back debts by arranging fiscal funds and using assets and resources, and steadily defused government debt risks, making important progress.
Starting from the second half of 2022, debt risks and hidden dangers have emerged in some places due to various factors. In July 2023, a meeting of the Political Bureau of the CPC Central Committee stated that we should effectively guard against and defuse local debt risks, and formulate and implement a package of debt-clearing plans. The State Council established a work coordination mechanism to guide provinces to formulate specific debt-clearing plans. Relevant departments, Party committees and governments at all levels have stepped up their efforts and taken more pragmatic measures. The MOF set up a bond issuance quota of over 2.2 trillion yuan in 2023 to support localities and particularly high-risk areas, in addressing existing debt risks and clearing arrears owed to enterprises, alleviating the overall local government debt risks. Outstanding hidden debt registered on the government platform nationwide dropped 50% compared to five years ago at the end of 2023, and the risks are controllable.
Since 2024, after fulfilling relevant procedures, the MOF has arranged an additional 1.2 trillion yuan of quota to support local governments in clearing existing hidden debts and settling arrears to enterprises. In order to ease the pressure on local governments to defuse risks caused by debts, in addition to continuing to arrange a certain amount of quota in the new special bond limit each year to support the relief of existing government investment project debts, we planned to substantially raise the local government debt ceiling in one lump sum to pave the way for the replacement of existing hidden local debts, increase support for local governments to defuse debt risks. The relevant policies will be explained in detail to the public after going through the statutory procedures. It should be emphasized that this policy, which is about to be implemented, is the most powerful measure to support debt relief in recent years. This is undoubtedly a timely policy, and will greatly ease the burden on localities to defuse debt risks, release more resources for economic development, boost the confidence of business entities, and ensure that, at the primary level, basic living needs are met, salaries are paid, and governments function smoothly.
Next, the MOF will work with relevant departments to ensure that primary responsibilities of local governments in local debt clearing are fulfilled, guide local governments to steadily defuse hidden debt risks, and promote the transformation of financing platforms. At the same time, we will strictly investigate and hold to account those who violate laws and regulations on debt issuance and rectify them within a time limit. Any issuance of debt that is illegal or against regulations will be dealt with immediately, and those responsible will be held accountable to resolutely control the risk of hidden debt expansion.
As for the specific amount of policy arrangements you mentioned, we will make it public in a timely manner after going through the statutory procedures. Thank you.
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