Efforts of provinces such as Guizhou to resolve local government debt risks through market-oriented cooperation with State-owned asset managers will strengthen China's efforts to improve local governments' financial sustainability and maintain sound economic growth in the long run, experts said.

Their assessment followed a major step taken by Southwest China's Guizhou province toward defusing potential risks and intensifying financial services to boost the real economy.

Last week, Guizhou signed a cooperation agreement with State-owned China Cinda Asset Management Co, which manages distressed assets.

"Cooperation between local governments and enterprises in a mutually beneficial and market-oriented manner to deal with local government debt is worth being recognized, because debt resolution itself eventually relies on the increase of fiscal revenues, and this mainly comes from business profits," said Luo Zhiheng, chief economist of Yuekai Securities, whose research focuses on China's fiscal policies and conditions.

"The newly introduced liquidity will help revitalize assets, give targeted support to key areas and provide a guarantee for Guizhou's sustainable development."

Luo said the cooperation agreement signed between China Cinda Asset Management and Guizhou's provincial government could prove a trendsetter, and can be introduced in other regions and provinces facing severe government debt repayment challenges.

The Ministry of Finance said earlier this year that the country will roll out a mechanism to resolve debt defaults in a marketed-oriented and law-based manner to properly defuse any potential financial risks at the local government level.

Any debt risks would be fairly shared among debtors and creditors, and the principle of "no bailout from the central government "will be strictly adhered to, the ministry said.

Li Xuhong, a professor at the Beijing National Accounting Institute, said defusing local government risks will have a bearing on China's high-quality growth in the long run.

"It will help alleviate local debt burden, optimize debt structure, provide more fiscal space for local authorities and strengthen the government's capacity to support local economic growth and improve livelihoods. It can also curb new debt, making the government's financial situation healthier. This will anchor market expectations and stimulate more effective investment," she said.

Guizhou province will develop cooperation in various areas, with a focus on enhancing financial services for the real economy, forestalling and defusing risks, facilitating State-owned enterprise reform and helping the property sector overcome difficulties, China Cinda said in a WeChat post on Saturday.

Specific measures will be rolled out to provide stronger financial underpinning for the high-quality development and modernization drive of Guizhou, as highlighted by the 50-member financial expert panel and two-way cooperation, according to the post.

The GDP of Guizhou province, one of the nation's less-developed and debt-ridden regions, amounted to about 2.02 trillion yuan ($291 billion) last year, ranking 22nd out of 31 provincial regions on the Chinese mainland. Its local government debt exceeded 1.24 trillion yuan during the same period, according to data released by local authorities.

By the end of February, the amount of outstanding local government bonds stood at 36.22 trillion yuan, according to data released by China's Ministry of Finance.

The liability ratio of China's statutory debt last year was around 50 percent, which was relatively low by global standards. That said, local government debt was unevenly distributed among China's regions, with some areas facing higher levels of debt risks and greater repayment pressures, Finance Minister Liu Kun said in March.

Localities concerned were urged to assume due responsibilities, take concrete steps to mitigate local government debt risks and firmly hold the bottom line of guarding against systemic risks, Liu said, adding that China would make sure it is not compromised under any circumstance.

Economist Luo said the country's local government bond debt risk is controllable, as most projects and assets supported by these bonds are of sound quality, and the ongoing economic rebound strengthens local government financing vehicles' repayment capacity.

In addition, as local government debt issues deeply intertwine with risks in financial institutions, proper handling of debt also curbs financial risks, he said.