Putin Rules Out Capital Controls as Russian Outflows Swell
(Bloomberg) — President Vladimir Putin said his government doesn’t intend to impose measures to hinder capital movements from Russia. “We don’t plan to introduce currency restrictions or restrictions on the movement of capital,”
Putin said today at a Moscow investment forum organized by VTB Capital. His comments echo central bank Chairman Elvira Nabiullina, who …
Argentina Central Bank Head Quits After Fernandez Allegations
(Bloomberg) — Argentine central bank President Juan Carlos Fabrega resigned less than 24 hours after President Cristina Fernandez de Kirchner publicly criticized the institution for allegedly leaking inside information.
Fernandez will nominate securities regulator Alejandro Vanoli as a replacement, presidential spokesman Alfredo Scoccimarro told reporters in a conference call after markets closed yesterday. Vanoli would be …
China to Impose Quota on Local Government Debt Amid Risks By Bloomberg News
Oct. 2 (Bloomberg) — 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.
China’s borrowing spree since the global financial crisis has prompted economists including those at JPMorgan Chase & Co.
to compare it to debt surges that tipped Asian nations into crisis in the late 1990s and preceded Japan’s lost decade. The government is trying to rein in financial risks without worsening an economic slowdown.
The effect on growth may be “short-term negative, long- term positive,” said Tommy Xie, a Singapore-based economist at Oversea-Chinese Banking Corp. “Short term, local governments will be more cautious, which may trigger deleveraging — long term, the transparency should boost the efficiency of resource allocation.”
China’s stock market is closed through Oct. 7 for a weeklong holiday after the Shanghai Composite Index gained 12 percent this year. The offshore yuan strengthened 0.2 percent, the most since June, to 6.1658 per dollar as of 2:35 p.m. local time in Hong Kong.
Debt levels will be included as a “hard criteria” to evaluate officials, the statement said. Local governments will be granted “limited discretion” over borrowing, including issuing bonds for public-service projects. They should ensure financing for existing projects, it said.
Local-government debt swelled 67 percent from the end of
2010 to 17.9 trillion yuan ($2.9 trillion) as of June 30 last year, according to the National Audit Office. Almost 40 percent of local governments’ liabilities came from off-budget funding through their more than 7,000 financing vehicles, the auditor said in December.
Today’s statement comes after China’s legislature passed amendments to the nation’s budget law at the end of August that lay the legal framework for allowing local governments to raise funds by directly selling bonds.