• Home
• /
• Markets

China vows to tackle local government debt in ’14

China’s leaders pledged to tackle local government debt next year while creating a stable economic and social environment to promote reforms.

A residential building being demolished in Beijing. China’s government will stick to a prudent monetary policy and proactive fiscal policy in 2014. — Reuters

The government will maintain continuity and stability in its macro-economic policies in 2014 and stick to a prudent monetary policy and proactive fiscal policy, reported China Central Television, or CCTV, citing a statement from the annual Central Economic Work Conference that ended on Friday.

President Xi Jinping and Premier Li Keqiang are grappling with a surge in local-government debt, risks from shadow banking and environmental degradation as they implement reforms unveiled after a Communist Party summit last month.

The conference, held to map out economic policies for next year, concluded that the nation should seek “reasonable” growth in gross domestic product, or GDP, without giving a specific target.

“Judging from the wording, it is more likely that next year’s GDP target will be set again at 7.5 per cent rather than seven per cent,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia in Hong Kong.

“The main risk identified next year is the local government debt but policy makers appear to be determined to prevent it from being realised.”

This year’s meeting, attended by the top party leadership and government officials, ran for four days compared with two days last year and three days for the years from 2008 through 2011. Xi and Li both made speeches, according to CCTV.

‘Important Task’

“We must take controlling and addressing local government debt risks as an important task in economic work,” according to a statement from the conference read out on CCTV’s main evening news bulletin. Provincial-level governments will be held accountable for local debt, it said.

Last year’s meeting produced a statement that China will aim for a higher “quality and efficiency” of growth, instead of the “relatively fast” pace sought since 2006, a signal that leaders would tolerate slower expansion than the average pace of more than 10 per cent a year over the past decade.