CHINA will likely this year expand a program to alleviate the debt-repayment burdens of its local governments, the country’s finance minister indicated Friday.

    Finance Minister Lou Jiwei’s comments follow a recently announced plan by China’s Ministry of Finance to allow localities to sell 1 trillion yuan (US$161 billion) worth of bonds to replace their existing debts — mostly short-term bank loans with relatively high interest rates.

    The move comes as city halls and townships across the country struggle to repay trillions of dollars of debts racked up in the past few years to finance highways, airports and other big-ticket projects.

    The debt-fueled investment boom shielded China from the global financial crisis but left the country with greater financial vulnerabilities.

    With the debt-for-bond swap program, China hopes that various levels of government will be able to reduce their debt burdens by using longer-term bonds with low rates to repay old debts.

    “We’ll see how successfully local governments can sell those bonds,” Lou said.

    “At an appropriate time this year, we’ll likely swap more” local debts for bonds, Lou added.

    Borrowing by local governments in recent years has contributed to a surge in China’s debt levels, a trend that many economists have likened to the debt bubbles in the United States, Japan and South Korea before those economies fell into their most recent crises.

    Until recently, China’s localities hadn’t been allowed to borrow directly by law. Rather, to get around that restriction, they set up what Lou called “as many as 100,000 debt-issuing entities” — including so-called local-government financing vehicles — to raise funds. (SD-Agencies)