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EASING LOCAL DEBTS
According to a report of the National Audit Office (NAO), around 259.2 billion yuan of misused funds had been recouped by October 2011, nearly half of the 530.9 billion yuan (about 84.3 billion U.S. dollars) uncovered in the auditing of China's local government debts for the year 2010,.
The majority of China's local government funds are raised through local government financing vehicles (LGFVs), which are mainly set up to fund construction projects and have come under fierce criticism from people alleging they are poorly supervised and managed.
Mentioning the local government financing vehicles (LGFVs) at the financial conference, Wen stressed that local government debts are "generally safe and controllable" in an attempt to dispel worries over possible insolvency of local governments.
Wen said the revenues and spendings through the LGFVs will be included in the government's budget management while a mechanism will be established to control the gross local government debts through a risk-warning arrangement.
To alleviate local governments' financial strains and curb fast-spreading debt risks, China's State Council has allowed four local governments, including Shanghai and Shenzhen, to issue their own bonds.
IMPROVING MACRO-ECONOMIC REGULATION SYSTEM
Wen reiterated a prudent monetary policy for this year and make it more targeted, flexible and forward-looking by maintaining a "reasonable growth" in social financing.
"We have the confidence, capabilities and conditions to move economic development to a new stage," Wen said.
At the end of 2011, the nation's money supply had reached more than 12 trillion yuan (1.9 trillion U.S. dollars), accounting for 180 percent of the total GDP, making it the world's highest ratio.
Li Daokui, a member of the monetary policy committee of Chinas central bank, the People's Bank of China (PBOC), said this was too high a rate and would pose a risk if growth continued unabated.
"The systemic financial risk is the biggest worry currently," he warned at an economic forum on Saturday. "Bank lending should not be too loose, otherwise the debt default risk may increase and spark a crisis in the whole financial system."
Xia Bin, a monetary policy advisor to PBOC, said the prudent monetary policy means the government can no longer stimulate the economy with expansionary measures.
"Slowing growth is worldwide," Xia said. "It is not an issue concerning economic cycles, but a natural result of the restructuring of the global economy and the Chinese economy."
Jia Kang, director of the Fiscal Science Research Center of the Ministry of Finance, said, "China is now under systemic financial risk, but it is controllable".
Spending in the coming months will focus on manufacturing, boosting consumption and stabilizing economic growth, Jia said. These will work together with some tax reduction.
"However, the government's financial deficit this year is unlikely to exceed that of 2011," he added. |
