Local governments’ ability to repay creditors has declined, but debt-to-GDP ratio was well below international warning levels, a statement said

(From Caixin Online)

Overall risks associated with public debt are “controllable”, and there is room on the government’s balance sheet to borrow more, the Ministry of Finance said.

However, it warned the local governments’ ability to repay debt has weakened.

chain yuan

The country’s total government debt stood at almost 26.7 trillion yuan at the end of 2015, the ministry said in a statement on May 26. Out of this, local governments owed 16 trillion yuan. The figure was up from 15.4 trillion yuan in 2014, Lou Jiwei, the finance minister, said late last year.

Government borrowings as a percentage of the gross domestic product stood at 39.4 percent, below European Union’s warning line of 60 percent and lower than that of other major economies such as Japan and the United States, the ministry said. It said this indicates the government still has room to borrow further.

The ratio of total outstanding local governments’ debt to their annual income was 89.2 percent, the statement showed. The ministry says it was “below the international warning threshold,” but risks in some regions have increased.

The central government set the benchmark for the debt-to-annual income ratio at 100 percent. But levels of public borrowing in more than 100 cities and 400 counties had crossed this red line in 2015, Lou said. Read more

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