China's financial regulators urge support for resolving local debt risks

cnbc.com:

BEIJING — Chinese financial regulators at a central and regional government level held a video conference Friday to discuss the resolution of financial risks, according to a readout Sunday from the People's Bank of China.

The meeting called for coordinating financial support to resolve local debt risks, and adjusting policy for real estate loans.

The weak financial situation of local governments has prevented the central government from supporting the economy with fiscal policy, Rhodium Group analysts said in June.

Falling land sales from the property market slump has also been a drag on local government revenues.

China has so far taken a relatively cautious stance on stimulus despite an overall slowdown in growth and repeatedly disappointing data in the last few months. Earlier this year, authorities emphasized that preventing financial risks was a priority.

«China's ongoing property downturn and COVID restrictions last year have strained the finances of many local governments,» S&P Global Ratings analysts said in an early July report.

«This has widened the gap between the country's prosperous coastal provinces and the poorer inland regions,» the analysts said. «Investors are increasingly sensitive to the idea that some governments may not be able to rescue their debt-raising vehicles.»

In the last few weeks, Beijing has signaled a shift in its approach to real estate policy, and made some targeted moves toward easing.

On Monday, the PBOC lowered the one-year loan prime rate by 10 basis points to 3.45%, but kept the 5-year rate — the basis for most mortgages — unchanged from a month ago at 4.2%.

The meeting on Friday reflected a gathering of a new set of financial policymakers in China's overhaul of its regulatory