China has set up a debt-management department that will oversee borrowing by central and provincial governments, set debt ceilings, and police the murky world of liabilities generated by local government financing vehicles (LGFVs).

It is headed by Li Dawei who was until recently in charge of a government debt research and rehabilitation body.

Recall that last year the Chinese government had issued a 1.1 trillion debt-relief package to ease funding pressures on cash-strapped provinces and shore up flagging growth. The package underscored Beijing’s consolidation of the purse strings.

“ Since the 1994 tax reforms, local governments can neither introduce new taxes nor alter rates without Beijing’s approval ,” says China scholar Amit Kumar of the Takshashila Institution. “ Even their bo

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