In China's struggle to deal with rising debt ‘Transparency’ Takes the Centre Stage

In China's struggle to deal with rising debt ‘Transparency’ Takes the Centre StageChina's pursuit to solve its $3 trillion and still growing public debt problem by starting a domestic municipal bond market centre on the one thing its officials are most afraid of and that is transparency.

Beijing's long-standing vow to develop a municipal bond market to curtail rapid growth in other types of hidden public debt will take centre stage once more.

By allowing local governments sell bonds for cash, China wants to depend on agile markets rather than stiff regulations to keep spendthrift units under control.

Although the debt load shows China's government to be far less indebted than fiscally-troubled Japan and Greece, it raised eyebrows among analysts for its 67 percent jump since the last state audit was published in 2011. Though the auditor did not say which provinces have the heaviest burdens or face the biggest risks, except to note "certain" dangers in some unnamed regions.

However analysts say China's dreams of a municipal bond market are quite far. As building one has been hampered by a need of disclosure from local governments on how much money and assets they have, and how much they owe.

Tan Kim Eng, a senior director of sovereign ratings at Standard & Poor's in Singapore said, "If you want to lend to a specific government, you need to have a clue as to what the financial conditions are like."

"There's still a lot of work to be done on the fiscal transparency front."

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