BEIJING - China has taken steps to stamp out shadow local government debt to prevent systemic financial risks, a senior official said on Thursday (March 7).
"We will strictly block the 'back door' of illegal debts, put a 'tightening curse' on local government debts, and ensure that we win the battle in containing major risks," said Finance Minister Liu Kun.
Other than curbing the growth of hidden debts, the central government has set up a market and law-based mechanism to deal with defaulters and ensure that existing debts are reduced, he said at a press conference on the sidelines of an annual parliamentary meeting.
"The central government will not offer any bailouts and borrowers have to be responsible for the debts," Mr Liu told reporters.
He said that so far good progress has been made in reducing the debt pile.
While there are no official figures on the size of the hidden debts, analysts estimate it at around 40 trillion yuan (S$8 trillion), nearly half of China's annual economic output of more than 90 trillion yuan.
To better manage risks, Beijing has been encouraging local governments to sell bonds, in big amounts, to boost local coffers.
The quota for local government special bonds this year has been raised to 2.15 trillion yuan, up from 800 billion yuan last year.
Mr Liu explained that the funds will be spent on supporting the fight against pollution, alleviating poverty and preventing risks, as well as supporting major development projects such as building the Xiong'an new area, developing the Yangtze Economic Belt and the Greater Bay Area.
Another key area of spending will be on rebuilding shantytowns, building railways, roads and waterway projects, as well as projects relating to rural revitalisation.
This mirrors the budget increase at the central government level, which will see more money spent on infrastructure projects and to fight pollution.
Beijing will allocate 25 billion yuan to fighting air pollution this year, a 25 per cent jump on 2018. It will also increase spending by nearly 50 per cent to 35 billion yuan to control water and soil pollution.
In addition, the Ministry of Finance will also set aside another 40 billion yuan in special funds to support clean energy, energy conservation and emission reduction as well as to promote the use of new energy vehicles, Vice-Finance Minister Liu Wei told the same press conference.
However, he said investments by the central government in fighting air pollution, while very important, was not enough to fully resolve the problem.
He called for all sectors of society to participate in the cause.
"What we need is for the firms to take responsibility, as well as for the general public to join us (in the fight)," he said.
"Right now, the government is shouldering more than its fair share of the responsibility of cleaning up the environment. The enterprises or the market has not fully shouldered its responsibilities," he added.