Speaking at the inaugural meeting of the 13th National People’s Congress on 5 March, Chinese Premier Li Keqiang emphasised the central government’s ongoing commitment to combating systemic financial risk, while flagging an increase in the number of special bonds to be issued by local governments in 2018.
“The promotion of the prevention and dissolution of major risk has achieved marked progress. At present China’s economic and financial risk is under control overall.
“We need to address both the symptoms and the root causes, effectively eradicate hidden risk hazards, and strike firmly against illegal behaviour such as illicit fund-raising and financial fraudulence.
“We need to accelerate market-based legalised debt-equity swaps and corporate mergers and restructuring; strengthen the internal risk controls of financial institutions, strengthen the planning and coordination of financial regulators, and improve the regulation of shadow banking, online financing and financial holding companies.
“We need to prevent and dissolve local government debt risk, and strictly prohibit all forms of illicit and non-compliant debt raising and guaranteeing behaviour.
“Province-level governments will bear overall responsibility for debt within their own jurisdictions, and local governments beneath the province level will each bear their debts, and actively and appropriately dispose of the existing debt stock.
“We need to improve and standardise local government debt raising and financing mechanisms…this year arrangements have been made for 1.35 trillion yuan in local government special bonds, for an increase of 550 billion yuan compared to last year.
“Preferential support will be given to the steady construction of projects under development, and the scope of usage for special bonds will be rationally expanded.
“China’s economy is fundamentally sound, its policy tools are numerous, and it is fully capable of defending the baseline against systemic financial risk.”