China capable of defusing debt risks, experts say

Stress unlikely to derail recovery, countering Moody's 'negative' outlook

China is expected to completely defuse hidden local government debt risks in around four to five years, and the debt stress is unlikely to trigger systematic financial risks that would derail China's economic recovery, a source close to the matter told China Daily.

The anonymous source made the remarks when rebutting the recent downgrading by rating agency Moody's to its outlook on China's government credit ratings from "stable" to "negative".

The source said that China's on-balance-sheet government debt-to-GDP ratio is only about 50 percent, far less than many other major economies, and the hidden local government debt is much less than many estimate. Besides, half of the local government hidden debt will be properly addressed by the end of the year, with strengthened regulations forestalling any new debt from emerging.