China local government debt surges by 70%

Yuan notes Chinese banks rapidly expanded credit in the market after the global financial crisis to boost growth

Related Stories

China has local government debts of 17.7 trillion yuan ($2.9tn), up 70% from three years ago, according to an official report.

China's government asked the National Audit Office (NAO) in July to do a round-up of the debts outstanding at a local level.

The report showed some local governments were using new loans to repay more than a fifth of their debt.

China has a total government debt of about 58% of its economic output.

Persistent fears over the level of non-performing bad debt have affected perceptions of the world's second-largest economy, as some worry whether the loans can be paid back.

The figure is still less than half the debt burdens in Japan - the world's third-largest economy - and Greece, but some analysts warn that China's debt cannot continue to grow at this pace forever.

"While China's total government debt remains low by the OECD standards, the pace of the rise is still alarming," said ANZ Bank economists Liu Li-Gang and Zhou Hao.

"This national debt audit result could indicate that China's local government debt almost doubled in about two-and-a-half years."

According to the China Banking Regulatory Commission, local governments took up 80% of total bank lending in China at the end of 2010. Local governments in China borrowed heavily after the global financial crisis, to try to sustain growth rates.

The Chinese central government has repeatedly stressed the urgent need to guard against financial risks, including the local government debt problem.

More on This Story

Related Stories

More Business stories

RSS

Features

From BBC Capital

Programmes

  • A factory in JapanThe Travel Show Watch

    Factory infatuation – why Japan’s industrial compounds are drawing large crowds at night

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.