BEIJING, July 5 A senior Chinese official said
on Friday that the government did not know precisely know how
much debt local governments had built up and warned that it
could be more than previous estimates.
Estimates of local government debt range from Standard
Chartered's 15 percent of the country's GDP at end-2012 to
Credit Suisse's 36 percent. Fitch put the figure at 25 percent
when it downgraded China's sovereign debt rating in April.
Vice Finance Minister Zhu Guangyao said China had not
released official figures since a 2010 auditing report that put
local government debt at 10.7 trillion yuan.
"Currently, [according to] nationwide surveys, I think this
number will rise," Zhu said, defending the debt as mostly geared
toward fuelling infrastructure projects.
"A very important task for this administration is to clearly
determine the level of local financing platforms," Zhu told
reporters at a press briefing on high-level talks with U.S.
officials in Washington next week.
Dealing with the systemic risk posed by local government
debt is seen as one of the key priorities for the administration
of China's new president, Xi Jinping.
China's budget law forbids local governments from taking on
debt directly, but localities have borrowed trillions through
special-purpose vehicles known as local-government financing
Concerns have grown that the debts incurred could sour as
many infrastructure projects in China are for public use and not
profitable. Many local governments have also borrowed from
companies in private arrangements at high cost, with the money
often used in speculative real estate projects.
Zhu said Chinese banks have reported 9.54 trillion yuan in
loans to local financing platforms.
"The bad debt rate for these loans is only 1 percent," he