BEIJING Jan 30 China's banks have rescheduled
at least three quarters of loans made to the country's local
governments that were due to be repaid by the end of 2012,
according to Financial Times calculations from official data.
The paper said banks had rolled over an estimated 3 trillion
yuan ($482 billion), or even more, of 4 trillion yuan in loans
and interest that had fallen due for repayment by the end of
The paper's calculations were based on data reported by
local media showing that local governments had total outstanding
loans of 9.2 trillion yuan as at the end of 2012. That figure
was 9.1 trillion yuan at the end of 2010.
Between those two years, 41 percent of all local government
debt had been scheduled to mature, according to China's national
"The implication of a stable outstanding loan volume is that
the vast majority of local government loans that were to come
due over the past two years have simply been extended.
Accounting for interest payments of 6 percent a year, local
governments have paid back a maximum of about 1 trillion yuan,"
the paper said.
The significance of China's local government debts to the
wider economy is difficult to quantify. Such numbers in
developed economies would alarm investors, but China's low
overall level of central government debt suggests Beijing could
absorb all local government lending and still have a debt ratio
much lower than is typical in the United States and Western
The paper said its calculations were imprecise because
China's bank regulator, the China Banking Regulatory Commission,
only publishes data for total outstanding loans to local
governments. It does not publish data about refinancing or
China's local governments borrowed heavily at Beijing's
behest to fund massive infrastructure spending at the heart of a
4 trillion yuan economic stimulus plan unveiled in 2008, at the
depths of the global financial crisis.
It left them saddled with debts due to be repaid in many
instances far earlier than the projects which the loans funded
were due to be completed.
China said in late December that local governments would be
barred from injecting public assets, such as government
buildings, schools and hospitals, into local government
financing vehicles (LGFVs) in the latest bid to curb borrowing
and reduce potential risks to the world's second-largest
($1 = 6.2243 Chinese yuan)
(Reporting by Nick Edwards; Editing by Edmund Klamann)