China should allow financing vehicles...>

CHINA PRESS: China should allow financing vehicles and state-owned enterprises

controlled by local governments to default under market forces, which could

correctly judge the credit risks of local-government debt, Ma Jun, former chief

economist of the People's Bank of China, told the Shanghai Securities Journal.

Ma, now director of the Tsinghua University Finance and Development Research

Institute, stressed that the process needs to have as its primary goal the

prevention of a systemic financial crisis. The establishment of property taxes

nationwide should be accelerated as a source of income for local governments, he

argued, which would weaken the desire to increase liabilities and sell land for

more income to fund projects. Supervision by local People's Congresses should be

strengthened, with enforced debt quotas and transparency on balance sheets.

(Shanghai Securities Journal)