2013-12-12

China Closes Barn Door on Local Government Debt Financed Growth

Most of the horses are gone, but China has finally closed the barn door on the politically incentivized debt driven growth.

China to Make Local Officials Accountable for Government Debt
China's Communist Party said it will hold local government officials accountable for official debt and will scrap a performance evaluation system that primarily values economic growth.

The amount of debt raised by local governments will become a key indicator in evaluating officials in the future, according to a statement carried on the official Xinhua News Agency late Monday.

The ruling party will keep a record of local government debt and penalize officials who leave local governments with "massive" debt, the statement said without giving details. It added that environmental damage and pollution will also be factors considered in determining promotions.
Chinese local politicians had the same incentives as a poorly run company: load up on debt to fuel growth.

Still waiting for the results of the national debt audit. It was supposed to be done around the end of October and the delay is probably not a good sign.

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