China says fiscal support will remain flexible, debt ratio stays reasonable

BEIJING, Sept 12 (Reuters) - China's fiscal policy has ample room, the government's debt ratio remains "reasonable" and risks are controllable, finance minister Lan Foan said on Friday, pledging a more flexible fiscal push to shore up the economic growth.

The world's second-largest economy has been hobbled by persistently weak domestic demand, a multi-year property crisis and mounting U.S. trade pressure. Exports slowed in August as the boost from a U.S. tariff truce faded, fuelling calls for more stimulus.

"Fiscal policy... always keeps contingency measures in reserve and there remains ample room for stronger fiscal support in the future," Lan said at a press conference in Beijing.

"Next, the finance ministry will continue to maintain policy continuity and stability, enhance flexibility and foresight and strengthen forward-looking assessments of the situation," he added.

China late last year increased the amount of debt that local governments are allowed to raise through special bonds by 6 trillion yuan ($840 billion) over 2024-2026. As of end-August, 4 trillion yuan has already been issued, Lan said.

By end-2024, China's overall government debt hit 92.6 trillion yuan, comprising 34.6 trillion yuan in national debt, 47.5 trillion yuan in legal local government debt and 10.5 trillion yuan in local government hidden debt, according to the minister.

China's government debt-to-GDP ratio was 68.7%, compared with 118.2% for the average ratio of Group of 20 major economies and 123.2% for the G7, Lan said.

"Overall, China's government debt ratio is within a reasonable range, and risks are under control."

Transformation of local government financing vehicles (LGFVs), set up by local governments to fund infrastructure projects such as bridges and roads, has been under spotlight of China's debt cleanup.

Lan said as of end-June, more than 60% of LGFVs have cleared their hidden debt, while reforms are accelerating.

With key August data due on Monday, some analysts expect new spending plans and housing support.

($1 = 7.1210 Chinese yuan renminbi)