According to the statement released on Monday after the Central Economic Work Conference, China intends to take further deleveraging measures to guard against financial risks in 2016.
Reducing the use of financial leverage to limit financial risks is a necessary measure given the sluggish global economic recovery. China needs to reduce its leverage ratio and increase its direct financing ratio to promote sustainable and stable economic development.
The central government said in the statement that it will effectively defuse the debt risks of local governments, and credit defaults will be dealt with according to the law. It intends to strengthen all-round supervision of local government debts and regulate their financial activities.
The central government will launch a special program to manage and control financial risks, crack down on illegal fund-raising, strengthen the warning system for financial risks and properly cope with the risks. It will resolutely avoid systematic and regional financial risks and accelerate research into reforming the financial supervision system.
Experts expect local governments' debt replacement will be further expanded in the coming year. Meanwhile, direct financing and registration-based initial public offerings are also important policy measures for deleveraging.
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