China said it will set up a system to resolve debt risks of its local governments, as state leaders and top bankers wrapped up a two-day, closed-door meeting to set the priorities for the US$61 trillion ($83.32 trillion) financial sector.
After the twice-a-decade meeting chaired by President Xi Jinping, China Central Television also reported on its nightly news broadcast that oversight of the financial sector would be boosted further to resolve risks and to promote high-quality development. The Financial Work Conference was held on Oct 30-31 in Beijing.
The closely-watched gathering comes at a pivotal time for China amid growing questions over the country’s political and economic trajectory, in part spurred by Xi’s crackdown on large parts of the private sector. Foreign investors have been pulling money out of the country at a record pace and Wall Street firms such as Goldman Sachs Group Inc. have scaled back ambitious expansion plans.
Beijing has over the past year asked the nation’s largest banks to shoulder some of the responsibility by providing credit support to troubled developers as well as local government financing vehicles, which sit on a US$9 trillion pile of debt. Their increasing exposure has prompted warnings from some analysts that it could be a drag on the systematically important banks.
China kicked off a 1 trillion yuan ($186.72 billion) debt swap programme in late September, allowing local governments to replace their so-called “hidden” debt for bonds carrying lower interest rates.
The conference, which was delayed by a year due to China’s strict Covid-zero approach, was first held in 1997 in the wake of the Asian financial crisis. The gathering’s overarching goal is to push for financial reforms that aid economic growth and safeguard stability. Its importance has grown in recent years, with the latest meeting in 2017 presided by Xi himself, while the preceding ones were overseen by China’s premiers.
