Chinese officials punished for illegal local government borrowing

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A number of officials have been punished by local governments for violating regulations related to local debt, China’s Ministry of Finance (MOF) announced in an online statement and issued a reminder of its lifelong accountability system over the weekend, showing its determination to rein in debt levels.

A total of 57 officials in east China’s Jiangsu Province have been punished by the local government, with some dismissed from their positions, for violations they made to fund 32 projects between 2015 and 2016 through debt, according to a MOF online statement released on Friday.

Another statement said penalties were imposed on officials in southwest China's Guizhou Province for similar reasons.

The list may be extended, MOF said, noting that it will continue to publicize such cases as a warning.

China’s National Financial Work Conference held in July stressed the importance of the country's lifelong accountability system for debt management.

In another audit report on local government debt released on Saturday, MOF reiterated that the central government will not help pay local debt and repeated that local government and financial institutions should give up on their "illusion" that the central government will bail them out.

Official data showed that as of the end of 2016, China’s local government debt amounted to 1.53 billion yuan (233 million US dollars), slightly lower than the 1.72 billion yuan cap set by China’s National People’s Congress.

Local debt seems under control, but there are cases of hidden debt that was raised through a variety of financing channels, including government investment funds and government service purchase, newspaper 21st Century Business Herald reported on Sunday, citing an anonymous official from MOF. The paper noted that next step for Beijing is to limit the growth of such debt.