China's debt is under control and there is room for more government debt, the Ministry of Finance (MOF) said Thursday.
China's government debt to GDP ratio stood at about 41.5 percent by the end of last year, below the European Union's warning line of 60 percent and major market economies such as Japan and the United States, according to a statement by the MOF.
There is still room for China to raise its debt level by moderately scaling up insurance of treasury bonds and local government bonds, which will help cushion the impact of shrinking social credit on economic growth, the statement added.
MOF pointed out that local government debt is generally under control at about 89.2 percent, well below the international warning threshold.
China is capable of managing local government debt risk as most of the debts have quality assets as payment guarantee and future mid-high-speed economic growth will ensure smooth repayment, the statement added.
Concerns about China's debt levels reaching a critical threshold and posing a systemic risk are overblown and the country's high debt-to-GDP ratio must be put into perspective, according to a recent research note from HSBC.
However, it should be noted that local government' payment capability decreased while regional debt risk started to rise with illegal debt or improper public-private-partnership practices, the statement pointed out.
China will continue with local government debt quotas, budget management, risk warnings, emergency mechanism and debt swaps to ease risks, the statement added.
