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20 Feb 2014
Flash: China local debt rasing concerns - NAB
FXStreet (Guatemala) - Gerard Burg, Senior Economist at National Australia Bank said the Growing local government debt is a degree of concern, but it can be carefully managed.
Key Quotes:
“Concerns have been raised by the rapid growth in local government liabilities in recent years, with questions around the stability and security of China’s sub-sovereign debt, and the risk that a potential default could trigger a broader financial crisis”.
“China’s local governments have a critical role in China’s economic development, as they are responsible for the majority of the country’s infrastructure development. However under current regulations, they are prohibited from either borrowing directly from financial institutions or issuing bonds (except with specific approval from Beijing)”.
“Concerns of a wider financial crisis appear excessive, in part as the risks associated with local government debt appear to be weighted towards the short term, and with careful regulatory and fiscal reform, including greater transparency and accountability, these risks can be reduced significantly over the next five to ten years”.
Key Quotes:
“Concerns have been raised by the rapid growth in local government liabilities in recent years, with questions around the stability and security of China’s sub-sovereign debt, and the risk that a potential default could trigger a broader financial crisis”.
“China’s local governments have a critical role in China’s economic development, as they are responsible for the majority of the country’s infrastructure development. However under current regulations, they are prohibited from either borrowing directly from financial institutions or issuing bonds (except with specific approval from Beijing)”.
“Concerns of a wider financial crisis appear excessive, in part as the risks associated with local government debt appear to be weighted towards the short term, and with careful regulatory and fiscal reform, including greater transparency and accountability, these risks can be reduced significantly over the next five to ten years”.