China should come clean on local government debt, International Monetary Fund report says

Researchers urge Beijing to publish detailed and accessible budget accounts, and overall debt levels by province at least once a year

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A report by two economists from the International Monetary Fund touched on the controversial issue of transparency with regards to China’s accounting and reporting of its debt situation. Photo: AP

Published: 5:45pm, 11 Dec 2017Updated: 5:52pm, 11 Dec 2017

China should broaden its accounting methods to include off-budget quasi-fiscal spending to provide a clearer picture of its debt mountain, according to a report by economists from the International Monetary Fund.

Beijing’s accounts should encompass local authority financing vehicles, public-private partnerships, government guided funds, and any other items that are sources of implicit liability, Rui Mano and Phil Stokoe wrote in a working paper released on Friday.

“China’s official government accounts do not capture a large amount of fiscal spending delivered through off-budget units,” the report said. “Although progress has been made to legally separate off-budget units from the government, such units appear to not have been de facto separated from the government.”

The regulatory framework for public-private partnerships, which are commonly used by China’s local governments to finance infrastructure construction projects, needed to be improved, the IMF report said. Photo: Xinhua

The pair’s comments touched on the controversial issue of transparency with regards to China’s accounting and reporting of its debt situation.