China to Impose Quota on Local Government Debt Amid Risks

China announced plans to cap the amount of debt local governments can take on and ban them from additional borrowing through financing vehicles as authorities step up efforts to control risks to the financial system.

All borrowing by provinces and cities will need to be within a quota set by the State Council, China’s cabinet, and approved by the National People’s Congress, according to a statement posted to the central government’s website today. No figures were given for the possible amounts of the quotas. The central government won’t bail out local authorities, it said.