The China Banking Regulatory Commission (CBRC) issued a statement saying that bank loans to local governments do not pose a systemic financial risk, Bloomberg reported. The CBRC argued that local government credit risk can be contained by existing measures designed to secure repayment. However, the organization also stressed that local governments should get their finances in order. It was reported earlier this week that CBRC data indicated a potential repayment risk for 23% of outstanding loans made by Chinese banks to local governments, or about US$260 billion. Liu Mingkang, chairman of the CBRC, clarified that "serious repayment risk" does not necessarily entail default. Many of China’s local governments were lent loans for infrastructure projects during the country’s credit lending boom in 2009, prompting concern that many of the loans may not be financially viable.
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