China's Jiangsu province takes measures to rein in debt
BEIJING, Sept 25
BEIJING, Sept 25 (Reuters) - China's eastern province of Jiangsu is set to tighten the rules for land sales by local authorities from next month, in the first such step by local governments to rein in debt problems.
To fund China's urbanisation and ambitious state construction projects, local governments borrowed 9.7 trillion yuan ($1.6 trillion) from banks by the end of June, alarming some investors who worry indebted authorities may not repay their loans.
"To our knowledge, what Jiangsu is doing is the first in the country," the provincial government said in a statement.
From Oct 1, only 91 agencies linked to local governments in Jiangsu can borrow from banks by offering land as collateral, the provincial government said, a move that may have wide impact as land is a big source of financing for Chinese authorities.
Each of the 91 agencies has a card detailing its borrowing history and oustanding debt, the Jiangsu government said. Agencies must show banks their cards when they seek loans, and those who have exceeded borrowing limits will be refused.
Reuters reported in July that Jiangsu's local government bodies are the most indebted in China, with public records showing hefty borrowings via trusts and bonds.
Government bodies in Jiangsu have borrowed a total of 1.34 trillion yuan ($219 billion) from banks and through bonds and investment trusts -- or about 25 percent of the province's economy, a senior Jiangsu official has said.
Jiangsu's government has said its local debt problem is manageable.
Jiangsu's new rules on land sales were first drafted by the central government in November 2012 as part of plans to contain debt risks in the world's second-largest economy.
Although Beijing instructed local governments to enforce the rules in November last year, authorities had ignored the orders.
Land is a key pillar in China's state finances. Authorities buy land from residents for sale to developers at higher prices, raking in income that can be as much as 90 percent of total revenues, analysts say.
To maximise profits, authorities may buy land from residents at prices below market, or even seize it with little or no compensation. Activists call such moves human rights violations.
By giving only 91 agencies the approved cards to let them borrow from banks using land as collateral, Jiangsu, which has more than 100 local government bodies, makes it harder for officials to get loans.
The cards would be regulated by authorities including the local arm of the central bank, the bank regulator, the Finance Ministry and the Ministry of Land and Resources in Jiangsu, the Jiangsu government said. ($1=6.1210 Chinese yuan)
(Reporting by Koh Gui Qing and Shao Xiaoyi)
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