Li allays fears of China debt crisis; to fight corruption

Allaying fears of a crisis in China as the government's debt crossed a whopping USD 3.4 trillion, Chinese Premier Li Keqiang today also vowed to show zero-tolerance to corrupt officials and "ensure corruption has nowhere to hide".
China has attached high attention on government debt and risks in this area are generally within control, Li told his annual press conference at the end of the parliament session.
Citing an official audit of government debts last year, Li said the country's debt-to-GDP ratio is still below the internationally recognised warning limit.
After two months of nationwide audits, the National Audit Office disclosed that governments at various levels were liable for a total direct debt of 20.7 trillion yuan (USD 3.4 trillion) at the end of June last year, up 8.6 per cent, or 1.63 trillion yuan, since the end of 2012.

China's mounting government debt is considered as a latent danger to financial stability, and China has started to take steps to address the issue.
Li said while the level is within control, he cautioned that the problem should not be overlooked, promising to take further regulatory steps, including putting the debt under budgetary management, to strengthen oversight.

In China, local governments are not legally allowed to borrow funds on their own.
The fiscal funds they receive from the central government and other sources of revenue, such as taxes, cannot meet their funding needs either, forcing them to use back-door approaches for funding that involves state-owned firms and local government financing vehicles.

"We will keep the front open and block side doors," Li stressed at the media conference.
Li also said that authorities have set a timetable for implementing the Basel III accord in tightening regulative measures over shadow banking.
Regarding the defaults of financial products, Li said avoiding a few individual cases would be difficult, but efforts must be taken to make sure regional and systemic financial risks do not occur.
He said the government would also continue with the nationwide crackdown on corruption.
"China is a country under rule of law. No matter who he is, and how senior his position is, if he violates party discipline and the law of the country, he will be punished to the full extent, because everybody is equal before the law."

"Corruption is a natural enemy of the people's government," Li said adding, "We must put the exercise of power and the use of public money under institutional checks."
Li said the Communist Party of China (CPC) and the Chinese government are firm in will and determination to fight corruption, and "that is our consistent position".
The government will step up its efforts for the release of "a list of powers" and define a clear boundary for the exercise of power to ensure that it is not abused, he said.
The government will also carry out comprehensive audit in those areas which are of high concern to the public, such as the revenues on the transfer of land use rights and transfer of mining rights, according to Li.

"We will take institutional steps to ensure corruption will have nowhere to hide," he said.