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UPDATE 1-China says some local governments provide illegal debt guarantees
February 23, 2017 / 11:47 AM / 9 months ago

UPDATE 1-China says some local governments provide illegal debt guarantees

(Adds detail, analyst comment)

BEIJING, Feb 23 (Reuters) - China’s finance ministry said on Thursday some city and county-level governments are illegally providing guarantees for borrowing by related entities, as the country struggles to control rapidly growing debt.

China will stop these illegal activities, the Ministry of Finance said in a notice on its website, and strictly control local government debt risks.

The ministry on Tuesday issued rules for local-government bonds this year, telling regional governments to set “reasonable” bond issuance plans for 2017 and to control the pace of debt sales.

The government has tightened controls in recent years on new local-government debt to help ward off financial risks following a borrowing binge since the global financial crisis, but analysts say risks remain.

“In early 2016 the (Ministry of Finance) confessed that debt pressure on (local governments) is mounting, instances of borrowing in breach of regulations or in disguised form are still occurring and the prevention and control of potential risks is becoming exceptionally difficult,” Fitch Ratings analysts said in a research note on Wednesday.

The ministry said in November local-government debt was under control and the debt burden would not show a big change this year. (Reporting by Beijing Monitoring Desk and Elias Glenn; Editing by Jacqueline Wong)

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