As economic reforms roll out in China, local-government debt has expanded to 17.9 trillion yuan ($2.95 trillion), which includes 4.3 trillion yuan of contingent liabilities, reports Bloomberg, citing the National Audit Office.
The National Audit Office explained that local governments wouldn’t legally be obliged to make repayments for the 4.3 trillion yuan of contingent liabilities.
The audit office notes that China’s government-debt risks are under control in general, but there are potential risks at some places as local governments are responsible for 80 percent of spending.
While some economists say the accumulation of debt in recent years has been too fast and is not sustainable, others say it's manageable.
The audit-office report showed 10.9 trillion yuan of direct local-government debt as of June, with 22.9 percent of that amount due in the second half of this year. The direct local borrowing mainly related to municipal and county-level governments, which accounted for 44.5 percent and 36.4 percent of the total respectively. Provincial-level debt was 16.3 percent.
Beside direct debt and contingent liabilities, the 17.9 trillion yuan total included credit guaranteed by local authorities, which amounted to 2.7 trillion yuan.
The audit report showed the total debt for central and local governments was 30.3 trillion yuan at the end of June. Of 19.1 trillion yuan of direct central and local debt owing at the end of 2012, 5.38 percent was overdue, according to the audit office.