SHANGHAI (Reuters) - China is building a nationwide system to monitor the income and expenditure of local governments in a bid to control debt, the official China Daily reported on Tuesday, citing finance ministry officials.
As China steps up infrastructure spending in a bid to offset the economic impact of trade frictions with the United States, it has vowed to minimize financial risk and prevent local governments from taking on too much debt.
It is now establishing a budget performance evaluation and management system that will supervise all investment and financing activities by both central and local governments, China Daily said.
It will also cover public-private partnerships and China’s sovereign wealth fund, and will include provisions to suspend funding for projects with “serious problems”, the report added.
The newspaper said Chinese local governments issued debt worth 378.9 billion yuan ($55.27 billion) last week, a record weekly high.
Total outstanding local government debt stood at 17.66 trillion yuan ($2.58 trillion) by the end of August, according to figures from the Ministry of Finance, about 18 percent of China’s GDP in 2017.
China has already drawn up guidelines to control hidden local government debt as it tries to crack down on the illegal use of corporate financing mechanisms to fund public projects.
The debt-ridden rustbelt province of Liaoning in China’s northeast has also established a parliamentary committee to scrutinize government spending and control debt, the first province to do so.
Reporting by David Stanway; Editing by Eric Meijer