China’s financial regulators call for support to resolve local debt risks

BEIJING – Chinese financial regulators at the central and regional government levels held a video conference on Friday to discuss resolving financial risks, according to a Sunday reading from the People’s Bank of China.

The meeting called for coordinating financial support to resolve local debt risks and adjust policy for real estate loans.

The weak financial situation of local governments has prevented the central government from supporting the economy with fiscal policy, Rhodium Group analysts said in June.

Falling land sales due to the slump in the property market have also been a drag on local government revenue.

So far, China has taken a relatively cautious stance on stimulus despite a general slowdown in growth and repeated disappointing data in recent months. At the beginning of this year, the authorities emphasized that the prevention of financial risks was a priority.

“China’s ongoing housing recession and COVID restrictions last year have strained the finances of many local governments,” analysts at S&P Global Ratings said in a report from early July.

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

Friday’s meeting mirrored a gathering of a new group of financial policymakers on China’s review of its regulatory system this year.

New central bank chief and party secretary Pan Gongsheng delivered a speech at the meeting, as did deputy leaders of the National Administration for Financial Regulation and the China Securities Regulatory Commission, according to the reading. He did not specify what they said.

The reading said the attendees included representatives of major state-owned banks, the Shanghai and Shenzhen stock exchanges, and the administrative office of the Central Financial Commission.