Local government debt signals rising risks in Chinese financial system
Local governments owe HK$23 trillion, underscoring dangers to the economy, but experts say country not on brink of debt crisis
Mainland local government debt had swollen to 17.9 trillion yuan (HK$22.7 trillion) by the middle of this year, according to the National Audit Office (NAO).
The figure is nearly 70 per cent more than previously disclosed, and will be seen as a further sign of the risks building inside the financial system of the world's second-biggest economy.
The disclosure, made on the NAO website, came as researchers at the China Index Academy forecast local governments' land sales revenue would hit a fresh record above 3 trillion yuan this year as they try desperately to raise funds to meet obligations.
The most comprehensive survey of debt across all levels of local government on the mainland delivered the most startling figure to investors since the disclosure in 2011 that local governments had racked up debts worth 10.7 trillion by the end of 2010.
"We believe the markets and the Chinese government should be alarmed by the rapidly rising leverage, but we do not believe China is on the brink of a debt crisis," Ting Lu, chief China economist at Bank of America Merrill Lynch, wrote in a note to clients.
Investors had been expecting a total close to 20 trillion yuan after former finance minister Xiang Huaicheng raised that possibility in April.
