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Debt doubles at local govt level in 2 years

2013-12-24 08:14 Global Times Web Editor: qindexing
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China's local government debt may have doubled to almost 20 trillion yuan ($3.3 trillion) by the end of 2012 from 2010, a report released by a government think tank showed Monday.

The country's local government debt rose to 19.94 trillion yuan by the end of 2012, a report released by the Chinese Academy of Social Sciences (CASS) showed Monday. An audit into local government debt by the National Audit Office (NAO) showed the figure stood at 10.7 trillion yuan by the end of 2010.

The total debt of China's central and local governments accumulated to nearly 28 trillion yuan by the end of 2012, accounting for 53 percent of the country's GDP, according to the main findings of the report sent to the Global Times on Monday.

"China's debt level was lower than that of major developed economies, but higher than other BRICS countries except South Africa. It is still at a moderate and controllable level," it suggested.

"China's government debt remaining at 53 percent of GDP is not significant compared with other major economies such as the US, the figure of which is around 100 percent, Japan, more than 200 percent and Europe 90 percent," Zhang Yongjun, a research fellow at the China Center for International Economic Exchanges, told the Global Times.

"The growth of debt quickened rapidly in recent years. With the slowdown of the economy and reduction of revenue sources, some local governments, especially those who heavily rely on resource development and land sales, will face greater pressure to pay back their debt," Zhang said.

On December 13, China concluded the annual Central Economic Work Conference, which listed "preventing and controlling local government debt" among six major tasks to be implemented next year.

Provincial governments will be held accountable for local debt incurred in the region, a statement released by the conference said.

Also, according to new standards for assessing local officials released early this month, the level of government debt will be a key indicator for evaluating the performance of local officials.

"The fundamental problem of local governments is that information about local debt is opaque," Zhang Bin, director of the taxation office at the National Academy of Economic Strategy, told the Global Times Monday.

According to Zhang Bin, a lot of projects, including those which cannot generate returns and those which can, were grouped in one package and financed through local financing platforms, making it difficult to distinguish between the source and nature of the debt.

"We also need to distinguish the scale of debt by specific local government. Some developed regions may incur a large amount of local debt but they have the ability to pay it back while the absolute amount of debt in other places like western regions and third-tier cities may not be large but these regions cannot pay it back," he said.

In an effort to curb excessive expansion of local government debt, which accumulated as they embarked on spending sprees on big projects to fuel the economy over the past few years, the NAO announced in July that it will conduct an audit of government debt.

The result of the audit is still pending.

The total of China's government debt was about 30 trillion yuan by the end of June this year, of which 18 trillion yuan was local government debt, the Beijing Youth Daily reported earlier this month, citing an unnamed official from the Ministry of Finance.

The NAO published an audit report in June on 36 local governments showing that their outstanding debt totaled 3.85 trillion yuan by the end of 2012, and the debt ratio of 16 local governments exceeded 100 percent.

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