(Bloomberg) -- China vowed to set up a long-term mechanism to resolve debt risks tied to local authorities and signaled willingness to expand borrowing at...
-- China vowed to set up a long-term mechanism to resolve debt risks tied to local authorities and signaled willingness to expand borrowing at the central government level as it concluded a twice-a-decade policy meeting.The two-day Central Financial Work Conference, attended by President Xi Jinping, stressed the need to consolidate Communist party control over the financial system and provide more funds for innovation, hi-tech manufacturing, green technology and small-to-medium sized companies.
A summary of the conference called for a “long-term mechanism” to prevent and resolve risks from local government debt. It also contained a vow to “optimize the debt structure of central and local governments.” Economists have long argued that China’s government debt is excessively concentrated at the local level.
Beijing has over the past year asked the nation’s largest banks to shoulder some of the responsibility by providing support to troubled developers as well as local government financing vehicles, which sit on a $9 trillion pile of debt. Fulfilling those duties is likely to hurt their profit-margins.“Large state-owned financial institutions will likely acquire more market share in the financial sector,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management.
The Communist party has asserted its control over the sector with a sweeping anti-corruption campaign and ideology push. Earlier this year, a new, enlarged national regulator was formed as some responsibilities were shifted from the central bank and government to a party-controlled body called the Central Financial Commission.Vice-premier He Lifeng made the concluding speech at the meeting, cementing his status as the country’s top financial official.
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