Sep 11, 2012 01:41 PM

Local Gov't Debt Manageable, NDRC Official Says

(Beijing) – Credit risks associated with local government debt are still at a manageable level, an official at the National Development and Reform Commission (NDRC) says.

"The ratio of local and central government debt to GDP is roughly 50 percent, which is lower than other European countries and the United States," said Xu Lin, the NDRC's director of finance.

He made the remarks at a forum on September 7.

At the end of 2010, local government debt totaled 10.7 trillion yuan. In 2011, the figure grew by 300 million yuan, Premier Wen Jiabao said in March.

Government debt in China plays a different role than in Europe and the United States, Xu said. China's government invests primarily in infrastructure, while other countries invest more on social welfare.

Cash flows can be generated from bridge tolls and wastewater treatment fees, he said, and indirect value was generated when the value of land increased near new roads.

As government land ownership structures remain unchanged, revenues from land sales will continue to buoy local government financing needs, Xu said. 

Minister of Finance Xie Xuren said that total revenue from land sales was 1.35 trillion yuan in the first seven months of this year, and total revenue was 7.45 trillion yuan.
Xu said credit risks could arise if the government's fiscal revenues continued to rely on land sales.

Revenues from land sales remain volatile under the current housing market environment. This year, total revenue from land sales is expected to be 1 trillion yuan less than in 2011.

Declines in revenue from land sales in many of coastal cities may spur governments to curb spending, Xu said.

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