China's fiscal reform to reduce local govt deficits: Moody's

BEIJING - China's ongoing intra-governmental fiscal reform will reduce local government deficit, rating agency Moody's said this week.

China's central and local governments must spend their fiscal revenue on public services. However, this puts pressure on some local governments, particularly those in poor areas.

Last month, the State Council announced that by 2020 it would clarify budget responsibilities by reclassifying all fiscal expenditures into three groups -- central government, local government, and both local and central.

The central government will be responsible for spending items beyond regional borders and it will also share some existing responsibilities with local governments.

Moody's said the reform is credit positive for local governments as less budget responsibilities will lower the pressure on their fiscal position.