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China 'fully confident' in curbing systemic debt risks, says finance minister

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China 'fully confident' in curbing systemic debt risks, says finance minister

China is fully confident it can keep systemic debt risks at bay and expects no apparent changes in the government debt ratio in the coming years, Finance Minister Xiao Jie said March 7.

China will set quotas on local government debt issuance and continue its crackdown on "chaotic" debt financing, Xiao was quoted by Reuters as saying during China's annual parliament meeting.

Policymakers have been concerned about China's local government finances and rising debt levels as the central government moves to dispel expectations of implicit guarantees for local government finance vehicles, or LGFVs.

"Whoever raised the debt would be held responsible for it," Xiao said, stressing he was fully confident that such measures would prevent systemic debt risks in China.

Xiao said the government debt-to-GDP ratio decreased to 36.2% in 2017 from 36.7% in 2016, well below the so-called alert line of 60%, China Daily reported. China's total outstanding government debt stood at 29.95 trillion yuan as of end-2017.

"China has formed a closed-loop system on managing local government debt including setting reasonably debt quotas, bolstering budget and risk management as well as controlling emergencies," Xiao said in the China Daily report. "China will deal with illegal debt firmly as issuing bond is the only legal way for local government to raise fund," he added.

In December 2017, People's Bank of China officials called for increased scrutiny of LGFVs and urged Beijing to let governments go bankrupt to help curb excessive borrowing.

As of March 6, US$1 was equivalent to 6.31 Chinese yuan.