Local debt much bigger than previous estimate
China’s local government debt and contingent liabilities surged to 17.89 trillion yuan ($2.93 trillion) as of the end of June, according to an audit.
The figure, released by the National Audit Office on its website, implied a 67 percent rise from a previous estimate of 10.7 trillion yuan at 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, especially if the new leaders can take decisive measures to arrest its rising leverage,” Lu Ting, an economist at Bank of America Merrill Lynch in Hong Kong, said in a note Monday.
Lu cited the central government’s “very low” ratio of debt to GDP, which stands at 21 percent.
People from across China gathered in Chairman Mao Zedong’s hometown of Shaoshan in Hunan province to commemorate the 120th anniversary of his birth on Dec 25.