BEIJING, June 27 China released a comprehensive
assessment of the debts of its local governments on Monday and
barred those entities from borrowing any further, taking its
first major step to reduce the risk of default and instability
in the world's second-largest economy.
Releasing its first audit of local government debt, which
amounts to 27 percent of the economy, China's chief state
auditor Liu Jiayi said efforts would be made to clean up and
regulate local government financing vehicles and the approach
would be based on the type of debt.
Below are some details of the audit:
SIZE AND STRUCTURE OF CHINA LOCAL GOVERNMENT DEBT*
-- Chinese provincial, municipal and county-level
governments accumulated 10.7 trillion yuan debts as the end of
-- Of the total, 6.7 trillion yuan, or 62.6 percent, were
government liabilities; 2.3 trillion yuan were in the form of
government credit guarantees. The remaining 1.7 trillion yuan
were contingent liabilities.
-- Of the 10.7 trillion yuan, 51.2 percent, or 5.48 trillion
yuan, were incurred before 2008; when the government unveiled a
massive stimulus programme to counter the impact from the global
-- By the end of 2010, the average debt-to-assets ratio for
local Chinese governments was 70.45 percent. Of them, 78 cities
and 99 counties have debt ratios of above 100 percent.
-- Among the borrowed money, local governments have invested
6.97 trillion yuan into transport and municipal infrastructure
projects by the end of 2010;
-- China local governments have used land as collateral for
2.5 trillion yuan, or 23 percent, of their debts by the end of
-- By the end of 2010, China had a total of 6,576 financing
vehicles, these vehicles hold 4.97 trillion yuan of debts for
governments, or about 46.38 percent of total government debts;
-- Among the vehicles, 358 were found to be taking new loans
to repay old debt; 148 were found to have a default ratio of
16.4 percent; and 1,033 vehicles were found to have unpaid
registered capital of 244.15 billion yuan.
-- Among local governments, three provinces, 29 municipal
cities and 44 counties have more than 10 vehicles each.
-- China will "clean up and regulate" local government
financing vehicles in principal of "who borrowed, who should be
responsible" and take different approaches to tackle different
government debts in a "proactive and steady" manner.
-- For projects engaged in competitive sectors with
operating profits, government liabilities will be stripped off,
and the debts should be paid by project earnings, with
government subsidies when necessary.
-- For government liabilities incurred at projects without
enough operating profits, debt repayment will be made by
government fiscal revenues.
-- Provincial-level government will be allowed to issue
bonds. But their debt plans have to go through the State Council
-- Local governments are not allowed to accumulate new debts
via financing vehicles, and government credit guarantees will be
* Note: The national audit report cover only governmental
liabilities; and not all debts of local government vehicles are
covered in the report.
(Reporting by Zhou Xin and Langi Chiang; Editing by Ramya