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Reuters:

The financial deleveraging carried out recently is likely to increase the financing costs of some businesses. In this context, will any fiscal policies be introduced to cushion the impact? In addition, how serious is the problem of hidden debt at local levels?

Liu Wei:

The first question you raised involves both fiscal and monetary policies. As to fiscal policies, we will intensify our efforts to reduce taxes and fees so as to ease the burden on businesses. Besides, budgetary spending will also play its role in this effort.

I think the relationship between deleveraging and financing cost increases you mentioned is not mathematical. As to what policies will be introduced, we will try to reduce the burdens on businesses by slashing taxes and fees. In addition, we will give more support tosmall and micro- businesses in key sectors and policy-backed financing guarantee institutions in the endeavor to promote more business start-ups andinnovation. Meanwhile, we will cooperate with other departments to improve the risk compensatory mechanism so as to lower the costs of financial institutions.

As to the second question, I have talked a lot about government debt, and I would like to invite Mr. Wang to give further information.

Wang Kebing:

Vice Minister Liu has elaborated on the management of local government debt from the perspectives of the measures undertaken by the Ministry of Finance, the achievements it has made and work in planning.I would like to add the following two points：

First, the CPC Central Committee and the State Council require that the increase of local government debt should be strictly controlled. The Ministry of Finance will adhere to the guidelines set by the CPC Central Committee and the State Council. We will stick to the approach of "close the back door, open the front door," improving mechanisms for local governments to secure financing in an appropriate way. In this regard, the following steps should be taken:

Impose appropriateceilings on government debt in accordance with the law. Local governments should coordinate the use of funds allocated to major public projects. More should be spent on strengthening areas of weakness.

Steadily promote the management and reform of special bonds, an important measure to "open the front door."We have issued two documents, namely,Local Government Land Reserve Special Bond Management Approach andLocal Government Toll Road Special Bond Management Approach. Analysis shows funds raised for these two areas account for much oflocal government debt. The measures, based on local realities, deliver Chinese "municipal bonds" to ensure local reasonable financing requirement. The work concerns constructing an important mechanism to ensure local reasonable financing requirement. So, we must do it well.

Accelerate the market-oriented transition of financing platform companies. We will delineate the boundaries of government and enterprise in accordance with the law, separate government's financing function from financing platform companies, and support the latter in their transition tobecoming independent and self-financed State-owned enterprises. Local governments undertake responsibility in regard to the financing range. The enterprises serve local economic development in accordance with laws and regulations. However,governments cannot take the responsibility of paying debt they have incurred.

Take resolute and legal measures to ensure that local governments raise funds in a regulated manner. Local governments can only issue bonds within the ceiling set; beyond that, there's no other way to borrow money.

Step up work in regard to investigating and dealing with illegal bond issuance and hold those responsible to account. The hidden debtmentioned by Reutersis, in fact, the debt raised by local governments in breach of laws and regulations. We must strengthen oversight over this kind of debt.Provincial governments should establish strict accountability mechanisms. The Ministry of Finance and other government departments will form a synergy to exercise joint oversight and supervision.

Second, six ministries and commissionsjointly issued a Notice on Regulating Local Governments Debt Financing in May this year. The Ministry of Finance then issued a Notice on Resolutely Stopping Illegal Financing in the Name of Government. These two notices clarified the time limits for local governments to undertake overhaul of their procedures. As far as we know, local governments are stepping up their actions. They are required to submit reports to us within the time limits set. I think great progress will be made in this aspect. Thanks.

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