China says to rein in local debt, push financial reform
BEIJING (Reuters) - China's top planning agency pledged on Tuesday to curb local government debt while the central bank said it will keep monetary policy stable in 2014 as it pushes financial reforms.
The promises come as China's policymakers are looking to put the economy on a more sustainable footing.
The National Development and Reform Commission (NDRC) said it would curb the "disorderly expansion" of local debt, remarks that came after the National Audit Office said local governments had run up total debt of 17.9 trillion yuan ($2.95 trillion) as at the end of June.
Leaders are looking for steady growth in the economy as they push through one of the country's most ambitious reform agendas, aiming to transform the economy into one driven by consumers rather than the traditional investment and exports.
But policymakers faces a series of challenges, including weak demand for China's goods overseas, over-capacity in industries at home and structural problems as well as the rise of debt at all levels of government.
The NDRC said that, overall, debt levels were under control, but it would take measures to keep debt down, including allowing local government financial companies to issue bonds to replace some existing short-term debt that has high interest rates, and encouraging private capital into infrastructure projects.
It will also step up spot checks on local government financing vehicles.
In a New Year message on the bank's website, www.pbc.gov.cn, People's Bank of China Governor Zhou Xiaochuan said monetary policy would be more pre-emptive and coordinated next year.
"We will vigorously promote financial reform, accelerate financial innovation to maintain financial stability, improve financial services and management to support the economic development and adjust the economic structure," Zhou said.
His comments supplement earlier ones from the bank after its fourth-quarter monetary policy committee meeting that China will achieve reasonable growth in credit and social financing while keeping appropriate liquidity to support growth.
The central bank has not found its part in the reform process easy, having tried to cut the cash in the system to rein in bank lending in a move that caused credit crunches in June and December.
The central bank said separately on Tuesday it had added 70 billion yuan ($11.6 billion) worth of three-day bills into China's money markets on November 18 via short-term liquidity operations.
Also on Tuesday, the central bank announced rules for financial institutions issuing asset-backed securities, saying they must keep at least 5 percent of the securities themselves to prevent risk.
In a further announcement, it said that as part of its ongoing interest-rate reforms, qualified banks would be able to allow their branches to issue certificates of deposits in future. ($1 = 6 yuan)