Economists feared the shadow banking nerves, together with massive local government debt, might trigger a financial crisis as China's economic growth slowed down to 7.5 percent in the second quarter, a rate much lower than the two-digit growth seen in the past three decades.
Shang Fulin, chairman of the China Banking Regulatory Commission, said most trust and wealth management products strictly regulated, and the risks of shadow banking were controllable.
Meanwhile, local government debt, though rising despite rigid curtailment, could be effectively resolved, some analysts claimed.
Chinese local governments had amassed 10.7 trillion yuan (1.7 trillion U.S. dollars) debt at the end of 2010. According to an audit of 36 local governments by the National Audit Office, their debt increased 12.9 percent from the end of 2010 to the end of 2012.
"Even though, there are not many bad debts among the massive government debt," said Lin Muxi, an economist at Liaoning University.
"Many debts are related to good assets, like transportation infrastructure and affordable housing projects. The terms may be long, but the debts are repayable," Lin said.
Song Li, vice director of the research center of economy at NDRC, said Chinese local governments were caught into a liquidity issue, but the issue would only be short-term.
Source: Xinhua
