A forthcoming audit of overall government debt in China is expected to reveal the status quo of growing government debt and its potential risks amid the country's economic slowdown.
The planned nationwide audit follows a previous one conducted by the National Audit Office (NAO), which found liabilities of 3.85 trillion yuan (about 624 billion U.S. dollars) owed by 36 local governments, including Shanghai, Tianjin and Chongqing municipalities, by the end of 2012.
The debt amount was 12.94 percent higher compared with that at the end of 2010, when the combined debt of the 36 local governments accounted for 31.79 percent of the 10.7 trillion yuan in total local government debt at that time.
"When we talk about the local government debt problem, we should at least know what exactly the size of the debt is," said Zheng Chunrong, an economic professor at Shanghai University of Finance and Economics.
"How to restrain local governments if we have no clear idea of the debt amount?" Zheng said.
In June, the NAO also warned about the common financing of some local governments via trusts or fund companies and the high interest rates.
As the country is undergoing economic slowdown with declining revenues from land sales for local governments, a major source of the authorities' fiscal revenues, the new audit will examine overall actual risks in this sector, experts say.
A large part of local government debt has been spent on urban construction, and the worries and pressures of a county-level finance official can shed some light on the situation.
The deputy head of the finance bureau of a county in central China's Hubei Province said the county government would ask the bureau to raise funds for infrastructure projects.
But insufficient funds forced the bureau to take out loans from banks. Later, due to the long process and difficulties in being approved for loans from banks, the bureau resorted to raising private funds, said the local official who declined to be named.
The interest on the debts alone brought him great pressure. "Our repaying abilities are very poor, but the debts are increasing, just like a huge mountain. I fear there will be a breakdown some day," he said.
In a new zone under construction in Xi'an, capital of northwest China's Shaanxi Province, the construction of infrastructure facilities relies on bank loans.
The zone borrowed nearly 2 billion yuan from banks in 2012, with part of the loans taken out at a yearly interest rate of 12 percent. The short-term, high-interest loans brought a heavy financial burden to the local government.
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