Articles Directory | Free Articles | New Articles Daily | this part of the debt will be transferred to the newly formed company, to reduce the debt burden of local government.

China Banking Regulatory Commission, Ministry of Finance and National Development and Reform Commission plans in June to September, up nearly 3 trillion yuan clean-up of local government debt, will also lift the provincial and municipal government agencies restrict the sale of bonds. Industry insiders say that part of the central government will step in to repay loans, state-owned banks (mainly large state-owned commercial banks and policy banks) will also bear part of the loss involved. Specifically, this part of the debt will be transferred to the newly formed company, to reduce the debt burden of local government.
In fact, nearly 30,000 billion debt only is China a huge part of local government debt, currently no authoritative statistics on any of the liabilities of local government figures released. We can see a data, the China Banking Regulatory Commission in August 2010 figures released by the end of 2009, local government financing platform loans was 7.38 trillion yuan in new loans in 2009, only 3.05 trillion yuan, accounting for all new 34.5% of general loans. This is from 60% of the world recognized warning line is very close. Can be seen in the 2008 to 2009, in response to financial crisis, the local government of misappropriating violent.
Some experts expect, so far, the local government debt accumulated at least 10 trillion yuan. More realistic situation is that the State Council issued a warning made investors cautious and the market to determine the dual background, the place already before loading the line of investment and financing system is encountering greater difficulties. At present local government debt risk is actually more than the financial crisis, a threat to security and social stability of the domestic economy the number one killer.
The problem is that in recent years in various disguised forms, and local government financing of local bonds issued in the form of platform is not integrated into the local budgets, borrowing money is not in place using the budget constraints, lack of transparency and standardization are, which may lead to risks. For local government officials, "who borrowed more, who's in office the greater achievements", the local government did not know their own solvency, but they pay more attention to the achievements within his term of office.
For example, a city in Shandong for two years before had set off a "loan" campaign promise of 10% per annum from financial debt. 32 supporting the city's construction projects with a total investment of 150 billion yuan. By the city finance bureau official figures, the city's local fiscal revenue in 2009 only 973 million yuan. So, this huge debt, relying on local financial revenue that point how to pay? This happens, no matter which way the local government to take and pass a huge debt dilution, the ultimate victims are the people.
Some people may think that local government debt and the people nothing. However, this is a misunderstanding. The central government debt in the handling of local government to use the central government, then, is the use of taxpayers - the people's money. Because much of the central government's money is through the collection of taxpayers - the people of the various taxes and fees turned over, such as income tax, value added tax, consumption tax and sales tax.
From another perspective, the central government if the local governments to use central government to resolve the debt, it is possible to reduce the livelihood of the people, improve people's livelihood and social security spending, the second may be transformed into the bad bank, the third may be worse the central bank to print money causing inflation to dilute the debt, these are the people's loss.
October 2010, the National People's Congress Cheng Siwei, former vice chairman, said in an interview, the local government debt if you do not pay attention, pay attention, then it may form a Chinese-style sub-prime, or subprime mortgage with Chinese characteristics Why? Because the U.S. subprime mortgage is no ability to repay the money lent to individuals, and Chinese-style subprime mortgage, no repayment is the ability to lend money to local governments, if he does not come out, then only two ways, One is the central government foot the bill, a bank bad debts increased. No matter which one, and finally all the people foot the bill.
Cheng's argument has its basis. Big debt of local government, and finally the formation of implicit rather than made, and eventually all the people suffer, "Chinese-style subprime mortgage crisis" in the final analysis because the government directly involved in micro-economic activities, the objective itself as a big company. The pursuit of economic activity, for any independent economic entities who are not enough, make millions of also want to make one hundred million, also want to make make a billion billion. Moreover, local government investment is other people's money to do their own thing, unlike independent business owners, do not have to jump from the money fix.
Back 10 years, the central government clean up local government debt, essentially taking all the old routine - first the local enterprises debt, bank debt, local government debt into bad debt, bad debt and then stripped to a company (formerly East's four major assets), the sale of its debt restructuring, the final loss by the central government and the banks. Although the clean-up the final outcome, but one thing is certain, the people who might turn into pay. So again, people in the past, present, and in the future are likely to "digest" the local government pay the debt.