Chinese state media and government officials have declared an initial victory in dealing with piles of local government debt, but analysts warn debt risks remain a big threat to the Chinese banking system and the world's second-largest economy, Reuters reported. In an attempt to quell investor jitters, China's state auditor in June laid the groundwork for a debt clean-up by releasing a review that said local governments had borrowed 10.7 trillion yuan ($1.67 trillion) by the end of 2010.

China signaled that it intends to take a more active role in trying to calm chaotic global and domestic markets, pumping cash into its banking system and allowing its tightly controlled currency to climb higher for a fourth straight day, The Wall Street Journal reported. There was a widespread belief among domestic investors that the country's state pension fund had started heavily buying shares. That perception reversed a sharp fall in the Shanghai stock market and helped it to close higher in a tumultuous trading session. As the U.S.

The U.S. credit-rating downgrade is piling more pressure on China to move away from an export-reliant economy that has produced mountains of currency reserves in declining dollars, though Chinese politicians, like those in Washington, often struggle to confront tough policy decisions needed to drive change, The Wall Street Journal reported. Some analysts say that harsh Chinese rhetoric aimed at the U.S. following the downgrade of U.S.

Chinese firms must get approval from bond investors before they restructure their assets, China's top economic planning agency said, in a move aimed at containing default risks from its pile of local government debt. The order by the National Development and Reform Commission (NDRC) confirms a Reuters report last week and thwarts any plan by indebted local governments to move assets out of their affiliated firms when they struggle to repay loans.

Chinese banks can withstand a 50% decline in property prices, the chairman of the country's banking regulator said, citing the results of the latest stress tests, The Wall Street Journal reported. Liu Mingkang told state-run China Central Television on Friday that the tests aren't a reflection of the regulator's view on China's property market, but they show banks will be able to press ahead with curbs on credit to the property sector.

Investors are worried about the health of China's banks. They're afraid—with good reason—that the massive, state-directed lending binge that was instrumental in pumping up China's GDP figures the past two and a half years will end up producing an equally massive pile of bad debt, The Wall Street Journal reported in a commentary. Barely a week goes by without new word of a troubled project or impending default. Never fear, say the banks and some analysts.

China's largest offshore oil and gas producer plans to spend $2.1 billion US buying Opti Canada Inc. in a move expected to inject cash into the troubled Long Lake oilsands project, in which the beleaguered Calgary firm has a stake, the Calgary Herald reported. The deal announced by state-owned China National Offshore Oil Corp.

When China announced a flagship program to make its currency more international in the summer of 2009, it cited "the growing call" from Chinese trading partners to use the yuan in cross-border transactions. More than a year later, the People's Bank of China touted the program as a "breakthrough," citing a surge in the amount of trade in the currency. Not everything went according to plan, The Wall Street Journal reported.

China has resumed drafting a bankruptcy law for banks, an effort that had been suspended during the global financial crisis, the news service Caixin reported on Thursday. China's banking regulator is in the preliminary stages of drafting such a law and is studying legislation in developed countries, Caixin quoted a source at the China Banking Regulatory Commission as saying, Reuters reported.

China's central bank said risks from the country's local government financing vehicles are controllable, underscoring Beijing's effort to dispel growing concerns about potential default risks associated with local government debt, The Wall Street Journal reported. The statement released late Monday by the People's Bank of China came after the National Audit Office rejected criticism of its estimate of local government debt, saying its assessment was accurate and made independently.