The Chinese government's leverage ratio edged up in the second quarter of 2019 amid efforts to support economic growth and improve weak links.
The end-June debt ratio for the government rose to 38.5 percent, up 0.8 percentage points from the end of March and 1.5 percentage points from the end of 2018, according to a report released Tuesday by the National Institution for Finance &Development (NIFD), a government think tank.
The pickup was mainly driven by local governments' debt ratio, which rose to 22 percent at the end of June from 20.4 percent at the end of 2018. Debt ratio of the central government dipped 0.04 percentage points during the period, it said.
Local governments issued 2.8 trillion yuan (395 billion U.S. dollars) of new bonds in the first half of 2019, accounting for 70.7 percent of the annual local government debt quota. Most of the new bonds were used to finance major projects including shantytown renovation, transport infrastructure, rural vitalization and water conservation, according to the Ministry of Finance.
Despite the government debt pile-up, the NIFD said the Chinese government held adequate assets, which expanded along with the debts, and called for further loosening the purse strings to counter downward pressures.
The government bank deposits amounted to 35.1 trillion yuan at the end of June, equivalent to the combined explicit debt of the central government and local governments.
"We need to tolerate a moderate rise in leverage ratio, especially that of the central government, to support efforts in stabilizing economic growth," wrote the NIFD report.
The government should further increase its fiscal spending to let fiscal policies play the role of counter-cyclical adjustment, while improve the efficiency of fiscal funds, it said.
The country's total debt-to-GDP ratio rose to 249.5 percent at the end of June, up 0.7 percentage points from the end of March and 5.8 percentage points from the end of last year.