Chinese finance minister says public debt is manageable - MASAHIRO OKOSHI, Nikkei staff writer

March 28, 2015 1:41 am JST

Boao Forum

Chinese finance minister says public debt is manageable

MASAHIRO OKOSHI, Nikkei staff writer

Lou vouched for the fiscal soundness of China's municipalities, saying they won't go bankrupt. © Kyodo

BOAO, China -- The debt of China's central and local governments as of the end of 2014 is estimated at less than 40% of gross domestic product, Finance Minister Lou Jiwei said Friday.

     Lou, attending the Boao Forum for Asia here, stressed that the public debt is at a manageable level.

     The country introduced this year a special program to allow local governments to refinance some debt by issuing bonds, in an effort to ease repayment burdens. The rule will apply to up to 1 trillion yuan ($160 billion) of debt, enabling money borrowed at high interest rates to be turned into debt carrying lower rates.

     Chongqing Mayor Huang Qifan, also attending the forum, said that the rule would apply to 33 billion yuan of the city's debt. At the end of 2014, Chongqing had 590 billion yuan in outstanding debt, down 109 billion yuan from a year earlier.

     Lou noted that 100,000 entities, including departments of small municipalities, have raised funds on their own, emphasizing that control of the debt will be tightened. But he also argued that China's local governments have abundant assets and will not go bankrupt, unlike in other countries.

     Another topic of interest at the forum is the China-led Asian Infrastructure Investment Bank. Australian Finance Minister Mathias Cormann said the country is interested in participating in the initiative, but will make a final decision soon in light of some unresolved issues on how the bank will operate.

     On the potential fallout on relations with the U.S., he noted that bilateral ties are very strong but that won't get in the way of Australia's efforts to strengthen its relationship with China.