BEIJING (Reuters) - The finance chief of China’s Inner Mongolia region said the government is scaling back some project investments as part of efforts to control debt risks but noted debt levels remained within ranges set by Beijing.
Zhang Lei, the head of the finance office for the Inner Mongolia Autonomous Region, said state projects were put on hold as the local government takes a more conservative approach to major outlays in line with Xi Jinping’s call to prevent risks.
Some projects that exceed current financial resources will be temporarily stopped, Zhang said, while others may be scaled back and some canceled altogether.
“From a long-term perspective, these projects should be built ... maybe we can do them 10 or 20 years down the road,” Zhang told Reuters in an interview on the sidelines of annual parliament meetings last week.
His comments follow concerns from ratings agencies about the fiscal health of the coal-producing region and by extension state-owned firms after Inner Mongolia revised down government revenues for 2016.
Local government finances and burgeoning debt levels at China’s state-owned firms have also been a source of concern for policymakers as the central government has rejected the view that it will implicitly offer guarantees to government financing vehicles if they get into trouble.
Inner Mongolia’s debt obligations totaled 567.74 billion yuan ($89.79 billion) at the end of 2016, according to a stock market filing, or about 30 percent of the region’s GDP that year.
Moody’s Investor Service said in a February report that the recent restatements by Inner Mongolia and other regions could prompt a reevaluation to standalone credit strength of the affected regional governments.
Fitch Ratings, another ratings firm, downgraded $400 million in offshore bonds issued by the state-owned Inner Mongolia High-Grade Highway Construction and Development Company Ltd, citing concerns about the creditworthiness of the regional government.
However, while Zhang said debt risks needed to be reined in, he did not expect refinancing to be a problem for state-owned entities.
“Company debt could trigger other types of risks, and could ultimately impact social stability...The government cannot take a hands-off approach,” Zhang said.
“As long as the debt can be rolled-over, there’s no risk. We can help them get new credit to pay back old debt,” he said.
Reporting by Elias Glenn; Editing by Sam Holmes