PBOC's role in focus as local government debt grows

Shanghai

A SURGE in China's local-government debt pile is drawing focus to the central bank's role in avoiding a credit crunch as policy makers seek to develop a municipal-bond market.

Provincial authorities estimated they had some 16 trillion yuan (S$3.4 trillion) in liabilities in a review earlier this year, the China News Service said on April 25, citing a Ministry of Finance official it didn't name. That's a 47 per cent jump from 10.9 trillion yuan in June 2013.

With liquidity in the bond market being restrained by capital flowing out of China, a slowing economy and a booming stock market, the challenge for policy makers will be to ensure demand as they restructu…