Expand local debt-swap plan to further reduce burden, says official

To further reduce the debt burden, an official suggests expanding local government bond swap into commercial bond.

The plan was raised at a meeting of the Standing Committee of the National People's Congress by Deputy Finance Minister Zhang Shaochun on Tuesday.

"The repayment pressure of local government debt is increasing as the economic growth momentum is still weakening. Fiscal income is decreasing, especially because of the drop of local government's income from land selling, and there is possibility of debt risk burst in some areas," said Zhang.

To curb the potential debt risks, Zhang suggested to the country's top legislators to expand the local government debt swap program, or swap the bond issued by local governments into commercial or other non-governmental bond, as a measure to reduce the debt burden.

Commercial banks or other financial institutions are the buyers of the debt.

By Dec 12, the total swapped bond reached 3.18 trillion yuan, or 99 percent of the planned 3.2 trillion program, according to data from the Finance Ministry.

Meanwhile, the newly issued local government bond was 591.2 billion yuan, which is 99 percent of the planned quota for 2015.

The central government has tightened management on local government debt this year, especially banned the violation operation from local government financial platform.

As the deputy finance minister said, by the end of 2014, China's local government debt ratio was 86 percent, and "the debt risk is still under control".