(Yicai) Nov. 4 -- Following the central government’s recent call to improve oversight of government debt, China’s Ministry of Finance has established a Debt Management Department to bring together debt-related functions that were previously spread across different divisions and create a long-term management system.

The main duties of the Debt Management Department include drafting and implementing domestic debt management policies for the government, developing management systems and procedures for central and local government debt as well as preparing the quotas for national and local government debt, the ministry said on its website yesterday.

It is also responsible for managing the issuance and repayment of government bonds, overseeing foreign government debt and formulating the basic regulatory framework for it, as well as strengthening supervision to prevent and resolve hidden debt risks, which refers to borrowing by local government financing vehicles that are not recorded in official fiscal accounts and which poses higher regulatory risks.

The establishment of the Debt Management Department is part of the central government’s recent call to accelerate the creation of a long-term government debt management system, said Wen Laicheng, professor at the Central University of Finance and Economics.

The new department will be composed of several divisions, including General Affairs, Central Government Debt, Local Government Debt I, Local Government Debt II, Issuance and Repayment as well as Monitoring and Management.

Li Dawei, who previously served as a senior inspector at the ministry’s Budget Department and director of the Government Debt Research and Assessment Center, has been appointed head of the department, the ministry said.

The Ministry of Finance had set up a National Debt Management Department before, but it was later dissolved for various reasons, Wen said. Since then, national debt management duties have been spread across several departments, including the budget and treasury divisions.

With the establishment of the new Debt Management Department, both national and local government debt will be managed under one roof, covering everything from policy design and implementation to management and monitoring. This will help strengthen government debt management, he added.

By consolidating debt management functions that were previously spread across multiple departments, the new department will enable better management of government debt, Luo Zhiheng, chief economist at Yuekai Securities, told Yicai. This approach allows for more precise prevention of financial risks and encourages local governments to boost economic development and improve public services.

As of the end of last year, China's total government debt stood at CNY92.6 trillion (USD13 trillion), including CNY34.6 trillion in national debt, CNY47.5 trillion in local government debt, and CNY10.5 trillion in hidden local government debt. The government debt ratio stood at 68.7 percent, which is considered to be within a reasonable range, according to ministry data.

Editors: Dou Shicong, Kim Taylor