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China's Wen Says Government Debt 'Controllable'

Chinese Prime Minister Wen Jiabao
Chinese Prime Minister Wen Jiabao said the nation's government debt is at an "overall safe and controllable" level, that funding for key projects would be ensured, and that applying the brakes to the economy would be done in a way to avoid systemic risks.

Wen's comments, reported in the official "People's Daily," were made in a speech dating back to early January at the government's flagship financial work conference.

Wen pledged to contain and defuse local government debt risks and avoid the spread of financial risks.

"Currently, our government debt is overall safe and controllable," he said. "We are taking the issue of managing local government debt very seriously. Through clean-ups and regulation, the trend of expanding investment vehicles has been effectively contained."

China's state audit office said earlier this month it had uncovered 530 billion yuan ($84 billion) worth of irregularities involving local government debt.

But the figure is a fraction of the 2 trillion to 3 trillion yuan of sour loans economists believe are buried in the 10.7 trillion yuan of debt local governments had at the end of 2010.

The scale of debt worries investors because it could rock the banking system.