Local government debt levels in China have soared to almost $3tn in less than three years, according to an official audit highlighting one of Beijing’s most daunting challenges as it attempts to sustain economic growth while avoiding a financial crisis.
In a long-awaited report, China’s National Audit Office said local government debts had increased almost 70 per cent to reach Rmb17.9tn ($2.95tn) by the end of June.
The NAO, whose last survey put the burden at Rmb10.7tn at the end of 2010, added that while government debt levels were generally “under control”, there were “potential risks in some places”.
Yesterday’s audit, which included contingent liabilities and debt guarantees, was ordered by the State Council in June. Xiang Huaicheng, former finance minister, had previously estimated that local government debts could exceed Rmb20tn.
Officials and analysts have long worried about the amount of debt racked up by local governments, which are not allowed to tap banks directly but establish special purpose vehicles to borrow money.
Such borrowing, often secured against local land values, has helped China achieve impressive rates of growth.
There are increasing fears, however, of a hard landing for the economy as Beijing enforces fiscal discipline on local government borrowers. China’s short-term funding costs approached
9 per cent earlier this month before moderating towards the end of last week.
Speaking at the weekend, Chinese premier Li Keqiang said his government would guarantee “appropriate liquidity” and “reasonable growth in credit” next year.
In a recent report to China’s parliament, the State Council predicted a final GDP growth figure of 7.6 per cent for 2013, compared with 7.7 per cent last year and a post-crisis high of 10.4 per cent in 2010.
The NAO’s latest estimate for local government debt is equivalent to a little more than 30 per cent of gross domestic product, compared with 25 per cent of GDP at the end of 2010. “The pace of [local government] debt accumulation in recent years has been too fast and is not sustainable,” said Wang Tao, economist at UBS.
According to Ting Lu, economist at Bank of America Merrill Lynch, China’s total public debt now stands at 53.3 per cent of GDP, with corporate debt estimated at 111 per cent.
“The markets and the Chinese government should be alarmed by the rapidly rising leverage,” Mr Lu said in a note. “But we do not believe China is on the brink of a debt crisis, especially if the new leaders can take decisive measures to arrest rising leverage.”
Zhang Ke, a senior Chinese auditor, warned in April that local government borrowing was “out of control” and could spark a massive financial crisis.
Additional reporting by Emma Dong
中国国家审计署(National Audit Office)在外界期待已久的一份报告中表示，截至2013年6月底，地方政府债务增长近70%，达到17.9万亿元人民币（2.95万亿美元）。
美银美林(Bank of America Merrill Lynch)经济学家陆挺表示，中国公共债务总额现在相当于GDP的53.3%，企业债务估计相当于GDP的111%。