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China’s third plenum holds out hope for debt-hit local governments with funding reform
- China to aim for ‘clear division’ of central-local responsibilities and coordinated finances, full text of third plenum decisions shows
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Orange Wangin Beijing
China’s ruling elites have committed to boosting the financial power of the country’s local governments, seeking to overcome a decades-old structural problem for the world’s No 2 economy.
Over the next five years, China will aim for a “clear division of responsibilities, coordinated financial resources and regional balance” in the fiscal relationship between central and local governments, according to decisions endorsed by the Communist Party’s 20th Central Committee.
The committee made the decision at its third plenum last week, a gathering to lay out China’s economic road map for the medium term.
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The full text of the communique from the meeting was released by state news agency Xinhua on Sunday.
According to the document, the leadership agreed to grant local governments more “autonomous fiscal capacity”, allowing them to increase their tax sources and “appropriately” expand their management authority relating to taxation.
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The decision comes as local authorities battle a cash drain, raising the risk of defaults on trillions of dollars of debt and casting a long shadow over prospects for the Chinese economy.
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