China to Judge Local Governments by Their Debt

China to Judge Local Governments by Their Debt

With local government borrowing on the rise, Beijing will soon evaluate its local counterparts based on the amount of debt they incur. From Reuters:

The central organization department, which oversees the appointment of senior party, government, military and state firm officials, said debt will be key when evaluating performances, according to the state news agency Xinhua.

[…] Having borrowed a total of 9.7 trillion yuan ($1.6 trillion) from banks as of the end of June, China’s heavily indebted local governments are considered among the biggest threats to the health of economy.

Worse, there is little transparency on just how much was borrowed, from whom and by whom. Some analysts estimate local-government debt to be as high as 20 trillion yuan. [Source]

The new assessment measures will likely pressure local officials to look at other development indicators beyond economic growth and GDP. From Xinhua Net:

A circular on improving the work evaluation of local Party and government leaderships and officials stressed that “gross regional product (GRP) and its growth rates should not be the only main indices for the evaluation of local officials’ work achievements, and charts with these data must be banned.”

[…] “More distinctive and pertinent assessment indices should be created in accordance with the specific obligations of leaderships and officials at different levels and in different regions,” said the statement, citing the integration of sustainable economic development, people’s livelihoods, social harmony and ecological protection. [Source]

Click through to read more on local government debt, via CDT.


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