China calls for ‘strict accountability’ at local government levels where funds are misused
- State Council says it is forbidden to use public funds for ‘luxurious office buildings and halls, vanity projects and unnecessary landscaping works’
- In recent weeks, top Chinese officials have expressed concerns about mounting headwinds facing the world’s second-biggest economy
China’s State Council says local governments should be held accountable for wasteful spending, as Beijing seeks to strike a balance between controlling growing debt risks and maintaining steady economic growth.
“It is strictly forbidden to use funds for luxurious office buildings and halls, vanity projects and unnecessary landscaping works,” the council said, adding that misusing funds, violating borrowing guidelines and letting public funds sit idle must be “resolutely” prevented.
“If problems are found, serious rectifications and strict accountability must be implemented,” the council added.
Over the past few weeks, Li and the People’s Bank of China have increasingly expressed concerns about mounting headwinds facing the world’s second-biggest economy.
However, the quota for special-purpose bonds – which was around 3.65 trillion yuan (US$571 billion) in 2021 – was deemed too small to cover hefty infrastructure borrowing.
US rating agency Moody’s estimated in a report on Thursday that local governments could see a 5.1 trillion yuan shortfall in available fiscal funding next year, up from 4.9 trillion yuan this year, and the incremental funding burden is likely to be shared by the central government and local governments.
“However, we expect the central government to remain committed to its longer-term policy objective to contain contingent liabilities of regional and local governments arising from debts on LGFVs’ balance sheets,” Moody’s said.