Pan Gongsheng, Governor of the People’s Bank of China, speaks at the Lujiazui Forum in Shanghai, China, Wednesday, June 19, 2024.
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BEIJING – Pan Gongsheng, governor of the People’s Bank of China, said in a state media interview published late Thursday that China’s financial risks have declined, including the risk of local government debt.
Pan also said the central bank will work with the Ministry of Finance to help China achieve its full-year growth targets. he said Monetary policy will remain supportive.
Beijing is paying increasing attention to addressing the risks posed by high debt levels in the real estate sector, which are closely linked to local government finances. International organizations have long-standing calls for China to reduce Expanding debt levels.
“China’s financial system is generally sound and the overall risk level has dropped significantly,” Pan told the Financial Times in an interview. National television station CCTV. That’s according to a transcript translated by CNBC.
He pointed out that “the number of local government financing platforms and debt levels are declining” and the cost of debt burdens has “decreased significantly.”
Local government financing platform emerges in China Over the past two decades, enabling local authorities who cannot easily borrow directly to Funding infrastructure and other projects. Mainly local government financing platform Get financing from shadow banking.
A lack of regulation often means indiscriminate funding of infrastructure projects with limited financial returns. This increases the debt burden of local government financing vehicles, for which local governments are responsible.
S&P Global Ratings analysts said in a July 25 report that coordinated efforts by local governments, financial institutions and investors last year “relieved the most pressing repayment needs of the weakest local government financing platforms and boosted the market.” Sentiment,” which comes a year since Beijing launched a concerted effort to reduce risks in local government financing vehicles.
However, local government financing vehicle debt “remains a big problem,” the report said. The analysis found that more than 1 trillion yuan ($140 billion) of local government financing vehicle bonds will mature in the next few quarters, while the growth of such debt remains in the high single digits.
Slowing economic growth in China has exacerbated debt challenges. The economy grew 5% in the first half, prompting concerns among analysts that the country will miss its full-year growth target of around 5% without additional stimulus measures.
International Monetary Fund August 2 In its regular review of China’s financial situation, China said macroeconomic policies should support domestic demand and resolve debt risks.
The International Monetary Fund report stated that “small and medium-sized commercial banks and rural banks are weak links in the large banking system” and pointed out that China has nearly 4,000 such banks, accounting for 25% of the total assets of the banking system.
Solve real estate problems
Pan said through state media on Thursday that the number of high-risk small and medium-sized banks had fallen to half of its peak, but did not disclose specific figures.
In terms of real estate, he pointed out that China’s mortgage down payment ratio has reached a record low of 15%, and interest rates are also very low. Pan pointed out that the central government is Helps local governments with financing so they can purchase properties and convert them into affordable housing or rental units.
Real estate and related industries once accounted for at least a quarter of China’s economy. But in recent years, Beijing has been trying to shift the country away from reliance on real estate for growth and toward advanced technology and manufacturing.
Pan’s public comments come after a week of heightened volatility in government bond markets.
Earlier on Thursday, the People’s Bank of China made the rare decision to delay the extension of its medium-term loan facility and instead support Capital increase of 577.7 billion yuan Through another instrument called a 7-day reverse repurchase agreement. Pan highlighted the seven-day tool in June, when Discuss the People’s Bank of China’s reform efforts its monetary policy structure.
The People’s Bank of China is scheduled to release another benchmark rate – the monthly loan preferential rate – on Tuesday morning. After keeping the 1-year loan preferential interest rate unchanged for 10 consecutive months and the 5-year loan preferential interest rate unchanged for 4 consecutive months, the central bank revised the 1-year and 5-year loan preferential interest rates down by 10 points each in July. base point.
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