Third Session
10th National People's Congress and
Chinese People's Political Consultative Conference

Local Government Debts Detrimental to State Treasury

A National People's Congress (NPC) deputy from China's audit circles said local governments in many places are heavily in debt and the total amount of their debts far exceeds their repayment capabilities to the menace of the country's fiscal system.
Figures from the Ministry of Finance show that debts owed by local governments at all levels amount to 400 billion yuan (US$48 billion), about 15 percent of the country's aggregate fiscal revenues in 2004.
"The real figure could be even bigger," said Xie Liqun, director of the Zhejiang Provincial Audit Department in an interview with Xinhua on the sidelines of the NPC's annual session.
Chinese laws provide that local governments are not entitled to borrowing money from banks, but many of them turn to the investment firms they set up to obtain bank loans for their infrastructure development, he acknowledged.
If local governments' debts go on snowballing, they will sabotage the country's treasury, he said, adding that bloated debts, unless being serviced or written off, will be turned into large amounts of bad debts at banks, an already big headache for the vital banking system.
The central government should map out rules and regulations to oversee local government debts, he noted.
Of course, government at local levels should first bear in mind how much they have borrowed from banks, since their subordinate departments are all borrowing money and the accumulated figures are hardly available, Xie acknowledged.
China's fiscal revenues rose by 21.4 percent year on year to 2.6 trillion yuan (US$314 billion) on the back of robust economic growth, official figures show. 

(Xinhua News Agency March 12, 2005)

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