2017年CRI Risk of gov't debt controllable in China: expert

China's National Audit 1 Office has released a new report on how budgets across China last year were managed.

The report is suggesting the overall risk in China's local government debt remains 2 controllable.

To find and solve problems, the National Audit Office selected and audited 3 cities and counties in 16 different provinces where government debt has increased considerably 4.

The Audit Office analysis is suggesting that as of the end of the first quarter of this year, the overall debt in the local governments which came under the audit remains controllable.

The report notes that although there was an 87 percent growth in overall debt, most of the increased spending has been put into projects to help develop society, which it says has helped create a level of stability in the Chinese economy.

Analysis also suggests the overall debt-to-GDP ratio among those cities and counties which were audited sits at around 70-percent.

Zhao Quanhou, head of the Financial Studies Center at the China Academy of Fiscal 5 Science, says this figure is still relatively 6 low compared with other major economies.

"70 percent is not high. Generally the ratio for government debt is running between 100 to 150 percent globally. From this perspective, the debt ratio of China's local governments isn't high comparied to other countries. Currently we are experiencing the peak of urbanization nationwide, which local governments are financially responsible for. Compared with other developed countries during the same phase, China's government debt ratio is actually quite low," Zhao said.

China's central government has been taking steps to ensure local government debt remains under control.

Central authorities began cracking down on illegal fundraising in 2012.

Authorities have been allowing local governments to issue their own bonds since 2015, but have maintained tight quotas 7 on the amount they're allowed to offer to the market.

Steps have also been adopted to make budget management more transparent 8, including increased risk assessments 9 and tighter supervision 10.

Zhao Quanhou says the moves have made local governments in China more accountable.

"If we take a look at these measures, firstly, local governments are authorized 11 to issue their own bonds; secondly 12, a management mechanism 13 has been standardized 14 to regulate the amount of debt they run; thirdly, an emergency debt repayment 15 program has also been set up to reduce the likelyhood of defaults. Through these measures, local government debt is being properly managed," Zhao added.

On a national level, China recorded economic growth of 6.7-percent last year.

Wang Dehua with the Chinese Academy of Social Sciences says part of the reason behind the stable rate of growth is the way the central authorities prioritized spending.

"There were some interesting aspects behind how the central government formulated 16 its spending in 2016. First of all, the central government adopted proactive fiscal policies. As an example, much of the deficit 17 was used to reduce taxes and expenses for businesses to relieve the financial burdens they face. Secondly, funding for poverty alleviation 18, education and science was raised. Thirdly, the central government became more streamlined in how it spent its money, and also sped up tax reforms in many areas," Wang noted 20.

The report from the National Audit Office also notes the steps being taken to streamline 19 the country's state-owned enterprises, making them more lean and efficient.

State-run companies in China saw a combined profit increase of 1.6-percent last year, which is a sharp contrast to the 6.7-percent loss the SOE sector 21 took through 2015.