CHENGDU, Feb. 21 (NBD) -- Upon the request of the Ministry of Finance (MoF), Inner Mongolia Autonomous Region and Henan province as well as the Ministry of Commerce and China Banking Regulatory Commission probed into several counties and cities of the two regions over illegal debt or debt guarantee in January. 

Enterprises and financial institutions involved were punished in accordance with laws and regulations. 

This marks the MoF's first-of-its-kind crackdown on illegal debt guarantee of local governments. 

During his inspection in February, China's finance minister Xiao Jie highlighted the importance of better managing local government debts.

Zheng Chunrong, vice president of the Institute of Public Policy and Governance, Shanghai University of Finance and Economics, told NBD that the authority's move in January was timely and necessary, but there is a long way to go to effectively regulate more than 10,000 financial platforms funded by local governments. 

To keep a tight leash on debt financing, local governments should be urged to play an active role in supervision, promote the transformation of local financing platforms, tighten the control over local budget and bond issuance, and establish an early-warning mechanism, said an industry source who declined to be named.

Email: lansuying@nbd.com.cn