Money

No state bailout needed for local debt

(Agencies)
Updated: 2011-07-07 11:17

China's trillions of yuan of local government debt do not need the central government's bailout, a top Chinese banker said on Wednesday.

Guo Shuqing, the chairman of China Construction Bank, said at an academic forum that the local government debt's impact on the banking industry is "not so big that a (central) government rescue is needed".

To build much-needed infrastructure and stimulate economic growth in the wake of the 2008 financial crisis, local Chinese governments have borrowed massively and investors worry these loans could hobble banks and the economy if they sour.

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China's state auditor has estimated that local Chinese governments have borrowed a total of 10.7 trillion by the end of last year.

But Guo played down risks from the debt for his bank, China's second largest.

"For my bank, I don't think it's a big problem," Guo told the forum in English.

"We just choose the good projects, good companies. We also have a lot of measures to control the risk. Also these projects usually have very good cash flows," Guo said.

Guo too brushed aside concerns about the sale of 1.5 billion China Construction Bank shares by Singapore state investor Temasek for HK$9.39 billion ($1.2 billion).

"They're still our No 3 shareholder. I think they just did some short-term adjustments because of portfolio adjustments and cash balance. I am not worried about it," Guo said.