As China launches its municipal bond market, the central government is warning local cadres this doesn't amount to a bailout. Local governments that struggle to pay debts will need to come up with local solutions, said Lou Jiwei, China’s minister of finance. They won’t be bailed out by the central government, and China has no legal framework to enable them to declare bankruptcy.
Speaking at the Boao Forum for Asia, Lou said provincial governments are responsible for problems at lower levels, such as municipalities. If a local debt liability can’t be met, the province would have to arrange asset sales.
Lou spoke on a panel titled “Defusing...
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