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From the chinese press
(China Daily)
Updated: 2010-03-22 07:53
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Local governments' loan balance reportedly hit 7.2 trillion yuan in late 2009 - an increase of 3 trillion yuan. To solve the debt problem, the government should reform the official evaluation standards, says an article on Xinhua net. Excerpts:
There are three ways to solve the local governments' loan balance or debt problem. First, the central government can help local governments collect more funds by increasing taxes or issuing more currencies. But such a move could let the fear of high inflation come true.
Second, local governments can increase their revenue and reduce their expenses to repay their loans. But the self-consuming model could create many social and economic problems.
Third, though repaying debts will not empty local governments' coffers in the short run, it could ruin their credit balance and accumulate more fatal bad debts. Worse still, the financial crisis of governments could snowball into an all-round economic crisis.
Reforming the official evaluation systems is crucial to solving the debt problem. The central government should not take GDP as the only criterion to judge the performance of a local government. It should also take into account the bank loans a local government has taken and how much of that amount it could transfer to its succeeding administration.
(China Daily 03/22/2010 page9)
