China sets up new department to spearhead government debt clean-up drive
The move comes as Beijing steps up efforts to clear up masses of ‘hidden debt’ accumulated by local governments
China’s finance ministry has set up a dedicated department for managing government debt, with Finance Minister Lan Foan calling for “ironclad discipline” to prevent off-balance-sheet borrowing amid Beijing’s ongoing campaign to defuse local government debt risks.
The new debt management department is now listed on the Ministry of Finance’s official website. Its director is Li Dawei, who was previously with the budget department and also led a ministry-affiliated government debt research and evaluation centre.
The department’s main responsibilities include designing and implementing policies related to government debt, managing the issuance and redemption of government debt, and helping to set quotas for national and local government bonds, according to the ministry website.
It also takes responsibility for strengthening oversight over government debt and resolving hidden debt risks, as it consolidates a basket of duties that were previously shared among multiple units in the ministry.
The creation of the new department will allow the government to centralise its debt management efforts, which should help accelerate the development of a long-term debt resolution mechanism, Huatai Securities said in a research note on Monday.