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Govt debt may exceed 15t yuan

By Wei Tian in Shanghai | China Daily | Updated: 2013-09-10 07:00

China's government debt may exceed 15 trillion yuan ($2.45 trillion), said a government researcher, amid an ongoing audit of total borrowing.

Zhao Quanhou, head of financial research at the Fiscal Science Research Center affiliated with the Ministry of Finance, suggested that the figure may even run up to 18 trillion yuan.

Although debt has expanded at a controllable pace, experts said that aggressive borrowing by local governments must be halted, while many of these entities are trying to raise more money right now.

On Monday, Shanghai began a three-day, 11.2-billion-yuan offering of independently issued bonds. The offering was divided into five-year debt with a 3.94 percent interest rate and seven-year debt at 4.01 percent, according to a statement on the website of the city's finance department.

"As requested by the State Council, these bonds will be used for major public projects," the statement said.

The rates on these bonds are much lower than the average for local government debts of the same maturities, suggesting they are still popular among investors.

Shandong issued the same amount of bonds last month, and Guangdong will sell 12.1 billion yuan in debt on Sept 16.

New direct debt issues by local governments are likely to reach 50 billion yuan this year, compared with 28.9 billion yuan in 2012. Nonetheless, all of this debt will eventually be paid by the central government.

The National Audit Office said in late July that it would conduct a nationwide assessment of government liabilities. The NAO acted to address concerns about the expansion of local government debt and obtain a clearer picture of its potential threat to the country's financial stability.

Xia Bin, a counselor for the State Council and a former advisor to China's central bank, said at a recent conference the result would be "astonishing" and much larger than the last figure, which was 10.7 trillion yuan as of the end of 2010.

Zhao the researcher said the latest survey would encompass even low-level governments, as well as extra types of debts for which local governments are responsible. As a result, Zhao said, the growth in debt would be faster than in a survey last year, which found the debt scale for part of the country had expanded by 13 percent from 2010 to 2012.

"The NAO's statistical criteria are still relatively narrow. The actual number would exceed 20 trillion yuan," he said.

Addressing the Group of 20 summit in St Petersburg last week, President Xi Jinping said China's local government's debt is still under control, and the central government is taking measures to resolve the issue.

"We're not afraid of contingencies involving local debt, but the rush to raise debt should be curtailed," Zhao said, adding that debt-raising has become a way for some local officials to burnish their political records.

"As for a few local governments that have squandered large amounts of money to build extravagant office buildings, they should be asked to move out of their luxury buildings and work in plain offices.

"They should also be asked to sell the buildings and other assets to repay the bank loans," Xia said.

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