Michael Taylor, Moody's chief credit officer for Asia-Pacific (from right), China's Finance Minister Lou Jiwei, Huang Qifan, mayor of Southwest China's Chongqing Municipality, Li Jian'ge, chairman at Shenyin & Wanguo Securities, and former French Commerce Minister Jean-Marie Bockel discuss government debt during the Boao Forum on Friday. Photo: CFP

The debt level of Chinese local governments is under control, Finance Minister Lou Jiwei said at a panel meeting of the Boao Forum on Friday, addressing concerns on the mounting local government debts.

Total government debts accounted for less than 40 percent of China's GDP by the end of 2014, which is a relatively low level compared with other countries, Lou said. He said that debts of central government were 10 trillion yuan ($1.61 trillion) by the end of 2014, while the local governments are responsible for debts of around 12-13 trillion yuan.

The local governments will reportedly see a large percentage of their debts mature in 2015. To ease the pressure, the Ministry of Finance on March 12 announced a debt-for-bond swap program to reduce local government's interest burden and extend the maturity of their existing debt.

Under the program, 1 trillion yuan of the local government debts will be swapped into government bonds with lower interest rates and a longer maturity date. Lou said at the forum that financial institutions are expected to be the major purchasers of the 1 trillion yuan swap plan.

Michael Taylor, Moody's chief credit officer for Asia-Pacific, said at the panel that the swap plan has been a good way to ease the debt burden of local governments and it will also improve the transparency of the debts, which will be a positive signal to investors.

The 1 trillion yuan swap plan only covers 53.8 percent of the debts due in 2015, according to media reports. More swap plans may be introduced in the future, depending on the feedback for the first swap, Lou said.

Amendments to the country's Budget Law on August 31, 2014 allow China's 32 provincial-level regions on the Chinese mainland to issue bonds within a quota set by the State Council, because before the amendments, local governments were not allowed to issue bonds. Local governments are allowed to issue 600 billion yuan of bonds in 2015, according to the government work report that Premier Li Keqiang delivered on March 5.

"Debts are not necessarily a negative thing… It is reasonable for local governments to strengthen infrastructure by raising debts," Li Jian'ge, chairman at Shenyin & Wanguo Securities, said at the panel discussion.

Lou said again at the panel that the central government will not bail out local governments that are unable to repay their debts.

However, he also noted that local governments still hold large assets and the central government will also monitor the debt risks at local governments, thus the problems will be solved before any local government goes bankrupt.