Limit put on lo­cal gov­ern­ment debt

China Daily (Canada) - - NEWS CAPSULE -

China has put a ceil­ing on the amount of lo­cal gov­ern­ment debt, ac­cord­ing to the cen­tral bud­get for 2016 re­leased by the Min­istry of Finance.

The to­tal out­stand­ing debt of China’s lo­cal gov­ern­ments must be kept un­der 17.2 tril­lion yuan ($2.6 tril­lion) at the end of 2016, said the MOF.

The bud­get was ap­proved by the Na­tional Peo­ple’s Congress, China’s top leg­is­la­ture, on March 16.

China is try­ing to rein in lo­cal gov­ern­ment debt mainly caused by bor­row­ing dur­ing an in­vest­ment and con­struc­tion binge that fol­lowed the global fi­nan­cial cri­sis in 2008.

A debt swap mech­a­nism al­lows lo­cal gov­ern­ments to con­vert their debt to low­in­ter­est bonds, eas­ing the debt bur­den with­out dis­rupt­ing the broader econ­omy.

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