Local Chinese governments play game of debt cat and mouse with regulators
Illegal financing schemes are being uncovered as battle to reign in risks rages on
Local governments in China have been using schemes to classify financing of infrastructure projects as services procurement from private companies, reports Caixin, keeping the investments off of official budget sheets.
The arrangements have drawn scrutiny from regulators, with notable cases in Jiangsu and Henan provinces uncovered by the Ministry of Finance. Dozens of local authorities have been caught circumventing regulations in place to control government debt, underscoring government efforts to reign in risks.
“Some regions have violated national laws and policies governing the procurement of government services to take on debt, turning one of the country’s major reform measures into a covert financing channel, which has severely undermined national security and risk prevention efforts,” the Ministry of Finance said.