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in order to strengthen the management of government debt, especially local government debt, the national people's congress has released a latest research report, pointing out problems and giving suggestions.

on september 14, the website of the national people's congress of china made public the "supervision and research report on the government debt management in 2023" (hereinafter referred to as the "report") by the financial and economic committee and the budget working committee of the national people's congress. this report was formed since march this year, based on research in 20 provinces including guangdong, jiangsu, guizhou, yunnan, and extensive listening to reports from all parties and opinions and suggestions.

after introducing the development history of my country's government debt and the strengthening of government debt management and supervision, the report points out that there are four major problems in current government debt management and risk prevention and resolution.

question 1:there are risks in some local areas. in recent years, the scale of government debt has grown rapidly. in some places, the scale of debt is large and the risk level is high, which is easy to cause risks.

at present, china's government debt risk is generally safe and controllable. as of the end of 2023, the national government statutory debt ratio (the ratio of government debt balance to gdp) is 56.1%. this is lower than the internationally accepted 60% warning line and lower than that of major market economies and emerging market countries.

at present, the government debt risk is mainly reflected in local government debt. although the risk is generally controllable, the ministry of finance has previously publicly stated that the debt distribution of local governments in china is uneven, and some local governments have high debt risks and are under great pressure to repay principal and interest. after a package of measures to prevent and resolve local debt risks were implemented, local debt risks have been alleviated overall and are generally controllable.

question 2:the budget management of government debt needs to be strengthened. some local governments reported that there are fewer and fewer special bond projects that can achieve a balance between financing and income, and it is becoming more difficult for special bonds to balance multiple goals such as profitability, public welfare, and investment. the national government debt and local government debt risk indicator system is still not perfect. the asset management system corresponding to liability management has not yet been standardized and established.

currently, the new bonds issued by local governments mainly come from new special bonds, with a quota of 3.9 trillion yuan this year. as of july this year, of the approximately 42.8 trillion yuan of local government debt balance, the balance of special bonds reached 26.6 trillion yuan, and the rest was general debt balance.

unlike general local government bonds that are invested in public welfare projects with no returns, special bonds need to be invested in public welfare projects with certain returns, and the project returns must be able to cover the principal and interest, which is also called financing-income balance.

however, in practice, as there are fewer and fewer special bond projects that can achieve a balance between financing and benefits, some places have packaged projects and exaggerated their benefits when applying for special bond quotas in order to obtain special bond quotas. coupled with some poor project management and operation, local audit reports in recent years have found that the benefits of some special bond projects are lower than expected, or even zero.

for example, in august this year, the ningxia audit office disclosed an audit report stating that it found 242 special bond projects predicted to achieve revenue of 12.1 billion yuan by the end of 2023, but in reality there was no income, and it was impossible to rely on project income to repay principal and interest, which put great pressure on fiscal expenditure.

in addition, the asset management system for special bonds is not perfect. some project assets are registered in the name of local state-owned enterprises, but the government is responsible for debt repayment. for example, this year's beijing audit report found that changping district transferred 4.79 billion yuan to increase the equity of district-owned state-owned enterprises. the bond project income belongs to the enterprise, and the principal and interest repayment responsibility is borne by the district finance.

question 3:the market-based constraint mechanism is not sound enough. in the issuance of local government bonds, project information disclosure is insufficient. some financial institutions do not conduct strict review and management of financing. the credit rating results issued by credit rating agencies do not reflect the differences in the financial and economic debt conditions of various regions.

for example, the current disclosure of local government bond information focuses on the regional macroeconomics, fiscal revenue and expenditure, etc., which are the key statistics of the financial department, rather than the government micro-financial information that is highly related to local government bonds. financial institutions invest based on government credit, and some of them do not strictly review and manage specific projects. at present, the credit rating results issued by credit rating agencies for all local government bonds are the highest credit rating.

question 4:legal constraints and accountability need to be strengthened. the budget law’s provisions on the issuance, use and management of local government debt are relatively principled, and the relevant supporting laws and regulations are not sound and complete. many places have not strictly implemented the budget law’s provisions on government debt management, and some have not held people accountable in accordance with legal provisions. in some places, the supervisory role of the people’s congress has not been effectively played.

the report also gives four targeted opinions and suggestions on these issues.

suggestion 1: better coordinate the resolution of government debt risks and stable development. for example, explore and study the establishment of a government debt scale control mechanism suitable for my country's national conditions to form a stable expectation of a reasonable level of government debt.

suggestion 2: accelerate the establishment of a government debt management mechanism that is compatible with high-quality development. for example, improve the scientific decision-making mechanism for special bond investment projects, solidify the reserve of high-quality projects, and eliminate investment behaviors that are divorced from reality, exceed fiscal capacity, and have unsatisfactory funding sources. strengthen dynamic monitoring of changes in project revenue and financing balance.

suggestion 3: better play the role of market-based constraint mechanisms. for example, further promote the disclosure of government debt information. strengthen the accountability of intermediary institutions for illegal and irregular behavior and dereliction of duty. improve the credit rating system for local government bonds.

recommendation 4: strengthen legal constraints and accountability for government debt management. for example, strengthen local responsibility, improve the lifelong accountability mechanism for local government debt and the mechanism for tracing back debt problems. strengthen the organic connection and coordination between financial and accounting supervision, audit supervision, and npc budget review and supervision, and form a joint force for supervision.