Allaying fears of a crisis in China as whose debt crossed a whopping $3.4 trillion, Premier Li Keqiang on Thursday said the country will push through market reforms and keep economic expansion strong enough to spur growth and create jobs.

Mr. Li’s comments come after the country’s first-ever default on a domestic corporate bond last week and as investors grow worried that other firms could follow suit.

China has attached “very high attention” on government debt and risks in this area are generally within control, Mr. Li told his annual press conference at the end of the parliament session.

He also defended the fixing a modest 7.5 per cent target for GDP, saying it is right for strike a balance between growth, job creation and controlling inflation.

Mr. Li said reforms in key areas have been set as a priority on the country’s overall reform agenda in 2014.

“The ultimate goal of all the reforms is to fully energize the market,” said the premier adding that the country would “carry out the reforms without hesitation”. Citing an official audit of government debts last year, Mr. Li said the country’s debt-to-GDP ratio is still below the internationally recognised warning line.

After two months of nationwide audits, the National Audit Office disclosed that governments at various levels were liable for a total direct debt of 20.7 trillion yuan ($3.4 trillion) at the end of June last year, up 8.6 per cent, or 1.63 trillion yuan, since the end of 2012, state-run Xinhua news agency reported.

China’s mounting government debt is considered as a latent danger to financial stability and China has started to take steps to address the issue.

Mr. Li said while the debt level is within control but at the same time cautioned that the problem should not be overlooked, promising to take further regulatory steps, including putting the debt under budgetary management, to strengthen oversight.

In China, local governments are not legally allowed to borrow funds on their own. The fiscal funds they receive from the central government and other sources of revenue, such as taxes, cannot meet their funding needs either, forcing them to use back-door approaches for funding that involves state-owned firms and local government financing vehicles.

“We will keep the front open and block side doors,” Mr. Li stressed as he held his once-a-year news conference after the close of the annual session of the National People’s Congress (NPC), the Communist Party-controlled legislature.

Mr. Li also said that authorities have set a timetable for implementing the Basel III accord in tightening regulative measures over “shadow banking”. Regarding the defaults of financial products, Mr. Li said avoiding a few individual cases would be difficult, but efforts must be taken to make sure regional and systemic financial risks do not occur.

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