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China bans some local government fund-raising activities

Published on Dec 31, 2012 2:16 PM
 An employee counts yuan banknotes at a branch of Bank of China in Taiyuan, Shanxi province, in a Feb 10, 2010 file picture. -- PHOTO: REUTERS

BEIJING (REUTERS) - China has banned debt-laden local governments from raising funds through certain activities in the latest bid to curb their borrowing and reduce risks to the world's second-largest economy.

"We have made some progress in regulating local financial vehicles and the trend of amassing such debt has been effectively curbed. But recently the illegal fund raising activities by local authorities tend to rise," the Finance Ministry said in the circular on its website.

Local governments will be barred from injecting public assets, such as government buildings, schools and hospitals, into local government financing vehicles (LGFVs), according to the circular, which was jointed issued with the country's top economic planning agency and the central bank, and dated Dec 24.

Local governments will be prohibited from using public assets to provide loan guarantees for LGFVs or forcing government workers and other individuals to buy wealth management and trust products, according to the circular.

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