China's Wen: government debt risk
2012/01/30BEIJING (Reuters) - China's Premier Wen Jiabao said the nation'sgovernment debt is at an "overall safe and controllable" level, that funding for key projects would be ensured and that applying the brakes to the economy would be done in a way to avoid systemic risks.
Wen's comments, reported in the official People's Daily on Monday, were made in a speech dating back to early January at the government's flagship financial work conference.
Wen pledged to contain and defuse local government debt risks and avoid the spread of financial risks.
"Currently, our government debt is overall safe and controllable," he said.
"We are taking the issue of managing local government debt very seriously. Through clean-ups and regulation, the trend of expanding investment vehicles has been effectively contained."
China's state audit office said earlier this month it had uncovered 530 billion yuan ($84 billion) worth of irregularities involving local government debt.
But the figure is a fraction of the 2 trillion-3 trillion yuan of sour loans economists believe are buried in the 10.7 trillion yuan of debt local governments had at the end of 2010.
The scale of debt worries investors because it could rock the banking system.
Wen said China "must both actively and appropriately ease financial and fiscal risks, and also ensure the funding needs of key construction projects approved by the government."
He warned, though, against a simplistic approach to local government investment.
"We cannot simplistically hit the breaks and use a one-size-fits-all approach, and must avoid turning localized risks into comprehensive, systemic risks," he said.
Wen also vowed to "break monopolies" against private capital participation in the financial sector, promising to "relax entry to encourage, guide and regulate the entry of private capital into the financial services sector, with participation in the ownership reform, capital enhancement and share expansion of banking, equities, insurance and other financial institutions."
(Reporting by Chris Buckley; Writing by Nick Edwards; Editing by Ed Davies and Ken Wills)
