China to judge local governments by their debt: Xinhua

December 15, 2013 Leave a comment

China to judge local governments by their debt: Xinhua

Mon, Dec 9 2013

BEIJING (Reuters) – China will soon rate the performance of local governments partly by how much debt they incur, as Beijing tries to wean the country off heavy government investment, state media said. The central organization department, which oversees the appointment of senior party, government, military and state firm officials, said debt will be key when evaluating performances, according to the state news agency Xinhua.Large-scale government investment has helped China’s gross domestic product expand at double-digit rates for the past three decades. But analysts say China’s economy has now hit a turning point, and domestic consumption must grow and investment fall to ensure a healthy expansion.

Having borrowed a total of 9.7 trillion yuan ($1.6 trillion) from banks as of the end of June, China’s heavily indebted local governments are considered among the biggest threats to the health of economy.

Worse, there is little transparency on just how much was borrowed, from whom and by whom. Some analysts estimate local-government debt to be as high as 20 trillion yuan.

Beijing ordered an audit of government finances in July and had planned to release the results in October but never did.

Among Chinese governments, the Jiangsu government in eastern China is the most indebted, a Reuters report showed in July. Chinese media has since said the Jiangsu government has outstanding debt of at least 1.3 trillion yuan.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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