Liaoning sets good example for discovering local govt debt risks

ACCORDING TO LIAONING DAILY, the province's people's congress is setting up an investigation committee to examine the government expenditure budget structure and government debt. Beijing News comments:

The investigation committee, which will strengthen supervision on government spending, is the first of its kind to be established by a provincial people's congress.

The debt issue has proved a challenge for many local governments. From a practical point of view, the primary problem is to face the issue of local government debt directly. Thus it is good that the People's Congress of Liaoning has taken the lead in putting the local government's spending in its cross hairs.

The report of the 19th National Congress of the Communist Party of China stated that it is necessary to resolutely address the major financial risks. Among these, local government debt is a factor that cannot be ignored. Such investigation committees can explore how the provincial-level regions can better manage and prevent their own debt risks. They should not only be vigilant to the perils caused by liabilities that a local government is directly responsible for, but also keep an eye on the risks harbored by the government's contingent liabilities.

The central government claims its screening has indicated the local government debts do not yet constitute "too large" a risk on the national balance sheet. However, it is hard for the central authorities to grasp the whole picture of local government debt issues, particularly indirect liabilities.

It makes more sense for the provincial-level people's congresses to exercise their legally-bound duty to supervise local government spending, especially in the regions where the local economy faces mounting downward pressure and the governments are more likely to raise new debts to repay the old ones and keep the higher-level authorities in the dark about their snowballing debt.

Hopefully, the investigation committee of Liaoning people's congress can fulfill its missions and set a good example on the management of local debt risks for other provincial-level regions. If there are big breakthroughs in these areas, we will be able to embark on a new path to resolve local government debt risks, thereby laying a solid foundation for economic transformation and upgrading.