China’s central bank chief on Sunday called for greater transparency in Chinese public finances, saying their murkiness means investors underestimate the risks of local government debt, the Wall Street Journal reports.
Zhou Xiaochuan, governor of the People’s Bank of China, said at a seminar hosted by the Group of Thirty in Washington that prices of Chinese municipal bonds are distorted by lending to local governments by state-owned financing firms.
“This kind of distortion makes the financial sector underestimate the risk of local government fiscal problems,” he said while answering questions after a speech. He said Beijing must pay more attention to fiscal reform.
“Fiscal policy transparency is not good enough,” Zhou said.
Zhou’s remarks come ahead of the ruling Communist Party’s twice-a-decade conclave on Oct. 18, where leaders must grapple with how to tackle heavy debt while sustaining economic growth.
Zhou said China is willing to play a greater role in the international monetary order, saying that he hopes that a network of swap lines established in recent years to funnel Chinese currency to banks around the world will help sustain the global financial “safety net”.
“We believe a global safety net can be more efficient than bilateral arrangements,” he said.
Earlier, Zhou said he thought Chinese government targets for cutting excess capacity in the steel and cement industries sound “optimistic.”
Beijing has said it wants to cut steel and cement production capacity by about 10 percent but Zhou said he thought that might be difficult given continued investment in urban housing and infrastructure.
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