【澳大利亚人0109】中国呼吁保护抵制地方债务违约的危机警告系统

lilyma06

China calls for risk warning system to protect against local debt default                                                                                                               

•                                                         by:                                                                                                                                        Leo Lewis                                                       
• http://www.theaustralian.com.au/business/world/china-calls-for-risk-warning-system-to-protect-against-local-debt-default/story-e6frg90o-1226239664475
  

                                                                                                                                                                                                                                                                                                                       
                                                                               

                                                                                                China's Prime Minister Wen Jiabao said a mechanism was needed to protect against debt.                                                                                                 Source: AP                                                                               

                                                               
               
       
                                                                                                                        CHINA has called for a "risk warning mechanism" to defend its financial system from a domestic debt crisis amid estimates that $1.2 billion of loans to local governments are at risk of ultimate default.                                                               
                       
                                Chinese Prime Minister Wen Jiabao said that local government debt was "still under control" but he reflected a rising tide of market concern when he said that China must "regulate its local government debt financial mechanism . . . and establish controls for the scale of local government debt".
His warnings followed mounting concern over the true state of local authority indebtedness and increasingly nervous speculation over the quality of the 11trillion yuan ($1.7 trillion) of debt held by local governments and their 6,576 financing companies at the end of 2010. Estimates differ on how much of that will be repaid: some analysts are confident that only about 2.5 trillion yuan will turn sour, while others believe that as much as three times that sum may never be repaid.
                                                                                                                                           

   

                       
               

                               
                          Moody's Investors Service, the ratings agency, has said that even the official calculation of total debt may be short by 3.5 trillion yuan.
The problem, according to analysts, arises from the reliance of local authorities on sales of land to supplement anaemic tax income. Falling land prices and the increasing sensitivity of land seizures are starting to destroy assumptions about how effectively local authorities can meet their debt commitments.
There are also alarming signs that as well as being inefficiently allocated, vast sums could have vanished into a morass of corruption and embezzlement. China's State Audit Office said last week that it had uncovered 530billion yuan of "irregularities" involving local government debt. The true figure is thought to be higher. Some analysts have described the problem as the equivalent to a bad debt crisis in 15 of the world's largest emerging economies, in multiple cities and in multiple local government funding vehicles in those countries.
China's problems with local government debt has its origins in the global financial crisis of 2008 and the colossal stimulus measures that Beijing used to avert a knock-on slowdown in its economy. The stimulus was augmented by a spectacular lending binge by the banks, much of which flowed through local government finance vehicles and then into infrastructure and construction projects of varying value.
Some governments spent wisely on projects with potential returns. Others did not. In the southern city of Chengde, a dollars 160million marathon track remains uncompleted after three years. Even when it is finished, nobody knows how an obscure city could attract the high-profile international marathon fixture that would ever begin to repay the investment.
Alistair Thornton, a China economist at IHS Global Insight, said that as China enters 2012, its fundamental dilemma remained unchanged; the government fears a repeat of the orgy of bank lending it unleashed between 2008 and 2010, despite the generally positive effect its stimulus had on domestic growth. But if China loosened policy in the face of falling exports and weakness in the eurozone, it could inflame precarious local government debt.
Mr Thornton said:  "China's economic policymakers are walking a tightrope".




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