Thursday, June 30, 2011
Chinese local government debt at $2.04 trillion
HOUSE OF CARDS?
Chinese local governments are racking up huge debts that they may have trouble paying off.
Chinese local governments held $1.65 trillion (S$2.04 trillion) in debt by the end of 2010, the state auditor said on Monday, warning that there was a risk that some could default.
Excessive borrowing by authorities to fund infrastructure and other projects has sparked fears among China's leadership about the risks the loans pose to the country's financial stability and the overall economy.
The amount is about 27 per cent of China's 2010 GDP of 39.8 trillion yuan (S$7.62 trillion).
'The ability of some areas and industries to repay debt is weak and potentially risky,' the NAO said.
The announcement represents the first time China has given an overall figure for local government debts, according to the state-run Xinhua news agency.
The state auditor said some local governments had to make new borrowings in order to pay back old loans, and some are depending heavily on revenue from land sales to meet their debt payments.