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China Central Bank's Zhou Calls for Clarity in Public Finances

15 Oct 2017 4:08 pm
By Jason Douglas 

WASHINGTON -- China's central bank chief on Sunday called for greater transparency in Chinese public finances, saying their murkiness means investors underestimate the risks of local government debt.

Zhou Xiaochuan, governor of the People's Bank of China, said at a seminar hosted by the Group of Thirty in Washington that prices of Chinese municipal bonds are distorted by lending to local governments by state-owned financing firms.

"This kind of distortion makes the financial sector underestimate the risk of local government fiscal problems," he said while answering questions following a speech. He said Beijing must pay more attention to fiscal reform.

"Fiscal policy transparency is not good enough," Mr. Zhou said.

Mr. Zhou's remarks come ahead of the ruling Communist Party's twice-a-decade conclave on Oct. 18, where leaders must grapple with how to tackle heavy debt while sustaining economic growth.

Mr. Zhou said China is willing to play a greater role in the international monetary order, saying that he hopes that a network of swap lines established in recent years to funnel Chinese currency to banks around the world will help sustain the global financial "safety net."

"We believe a global safety net can be more efficient than bilateral arrangements," he said.

Earlier, Mr. Zhou said he thought Chinese government targets for cutting excess capacity in the steel and cement industries sound "optimistic." Beijing has said it wants to cut steel and cement production capacity by around 10%, but Mr. Zhou said he thought that might be difficult given continued investment in urban housing and infrastructure.

The scale of Chinese steel and cement production has become a flashpoint in global trade, with critics including the administration of President Donald Trump saying it is hurting their domestic producers.

The G30 is private group of prominent central bankers, financiers, regulators and academics.

Write to Jason Douglas at jason.douglas@wsj.com

(END) Dow Jones Newswires

October 15, 2017 12:08 ET (16:08 GMT)

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