China is constructing a nationwide debt-monitoring system designed to keep in check the budgets and spending activity of local governments, the official China Daily reports.
The proposed system, referred to as the “budget performance evaluation and management system,” will expand existing supervision to include all investment and financing activities at all government levels, Hao Lei, director of the Budget Department of the Ministry of Finance, told the newspaper.
There will also be tighter restrictions on how, as well as how much, governments can spend. For the case of infrastructure spending, “government departments in charge of infrastructure investment should assess the performance,” before signing off new deals.
The new guidelines will also take a stricter stance on financially unsustainable policies and projects. “Local government officials and officials from government departments should take lifelong responsibility for budget performance,” the report states.
The Chinese government is hoping to address the issue of reckless and highly-leveraged spending by local governments whilst also maintaining a healthy borrowing rate for necessary infrastructure projects.