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Local govt debt of $3.3 trln at 'alarming level'

2013-12-24 09:00 Shanghai Daily Web Editor: qindexing

China's local government debt may have doubled in the previous two years to an "alarming level" of nearly 20 trillion yuan ($3.3 trillion) by the end of 2012, a government think tank said yesterday.

The combined debt of central and local governments totaled nearly 28 trillion yuan, or 53 percent of last year's gross domestic product, the Chinese Academy of Social Sciences said in China's first report on its debt and liabilities.

The local government debt was estimated at 19.94 trillion yuan, the report said.

"The level of local government debt deserves a lot of attention," said Li Yang, deputy head of CASS. "China's debt level has risen quickly in recent years, and all parties should be alarmed at this."

That is the latest estimate after a 2011 National Audit Office report concluded local government debt stood at 10.7 trillion yuan by the end of 2010.

The local government debt has risen in recent years due to heavy investment in infrastructure to fuel economic growth. The opaque debt situation has raised concerns about the government and the banks' asset quality.

The audit office in July started conducting an audit of all government debt at the request of the State Council, or Cabinet, but the results have not yet been published.

The CASS report said China's total unpaid debt, including that of consumers, corporations and governments, totaled 111.6 trillion yuan by the end of last year, or more than twice the GDP.

That is in line with a Standard Chartered Bank report which estimated China's total debt level at 215 percent of GDP last year. The bank has estimated the local government debt at 24 trillion yuan by the end of last year.

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