Premier pledges continued steady investment growth

The mainland will continue to increase investment at a "reasonable" pace, Premier Li Keqiang was quoted as saying yesterday, while promising to control risks arising from the pile of local government debt.

State radio quoted Li as saying Beijing would step up efforts to build roads, railways and other infrastructure projects across the country, and to advance financial reforms by freeing up its interest rate market and capital account.

"We will actively expand domestic demand and improve policies to boost consumption," Li was quoted as saying. "We will make the effort to effectively control risks from local government debt."

Investor concerns about the mainland's credit risks have been rising after rapid growth in state investment following the 2008-09 financial crisis led to prolific government borrowing from banks.

The South China Morning Post reported on Tuesday that the China Banking Regulatory Commission recently issued a circular outlining steps to tighten its grip on these loans. The measures included containing credit to substandard financing vehicles, prohibiting banks from guaranteeing bond issuances by local government financing vehicles (LGFVs) and setting up comprehensive records monitoring lenders' exposure to the sector, according to bankers briefed about the move.

"The prudent stance is generally a continuation from last year, but this time the regulator stressed preventing risk contagion from non-bank financial entities," said Fang Yan, an analyst at Guosen Securities.