China’s financial regulators urge support to solve domestic debt risks

China’s financial regulators urge support to solve domestic debt risks
  • China’s financial regulators held a meeting on Friday calling for coordinated support to solve domestic debt risks, according to an official statement on Sunday.
  • The meeting also reflected a new batch of China’s fiscal policymakers to reform its regulatory system this year.
  • Rhodium Group analysts noted that the weak fiscal position of local governments prevented the central government from supporting the economy with fiscal policy.

People walk past the headquarters of the People’s Bank of China (PBOC), the central bank, in Beijing, China, September 28, 2018.

Jason Lee | Reuters

BEIJING — Chinese financial regulators at the central and provincial government levels held a video conference on Friday to discuss resolving financial risks, According to read Sunday from the People’s Bank of China.

The meeting called for coordinating financial support to solve the risks of domestic debt and amending the real estate loan policy.

Rhodium Group analysts said in June that the weak fiscal position of local governments prevented the central government from supporting the economy with fiscal policy.

Decreased land sales from a stagnant real estate market have also been a drag on local government revenue.

Investors are increasingly sensitive to the idea that some governments may not be able to bail out the mechanisms of increasing debt.

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China has so far taken a relatively dovish stance on stimulus despite an overall slowdown in growth and repeatedly disappointing data in the past few months. Earlier this year, the authorities confirmed that preventing financial risks is a priority.

“The continued slowdown in real estate in China and last year’s coronavirus restrictions have caused financial stress for many local governments,” S&P Global Ratings analysts said in a report released in early July.

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“This has widened the gap between the country’s thriving coastal provinces and poorer inland regions,” analysts said. “Investors are increasingly sensitive to the idea that some governments may not be able to bail out the mechanisms of increasing debt.”

Friday’s meeting reflected a new batch of China’s fiscal policymakers to overhaul its regulatory regime this year.

New central bank chief and party secretary Pan Gongsheng addressed the meeting, as did deputy leaders of the National Administration of Financial Regulation and the China Securities Regulatory Commission, according to the statement. It did not specify what they said.

The statement said that the attendees included representatives of major state-owned banks, the Shanghai and Shenzhen Stock Exchanges, and the Administrative Office of the Central Finance Commission.

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