Chinese local governments held $1.65 trillion in debt at the end of 2010, the state auditor said Monday, warning there was a risk some could default amid fears that bad loans will harm the economy.
Excessive borrowing by authorities to fund infrastructure and other projects has sparked concerns among China's leadership about the risks the loans pose to the financial stability of the world's second largest economy.
By the end of last year, local governments had 10.7 trillion yuan ($1.65 trillion) of debt, the National Audit Office said in a statement, or about 27 per cent of China's 2010 GDP of 39.8 trillion yuan.
'The ability of some areas and industries to repay debt is weak and potentially risky,' the NAO said.
The announcement represents the first time China has given an overall figure for local government debt, according to the state-run Xinhua news agency.
The state auditor said some local governments had to make new borrowings in order to pay back old loans, and some are depending heavily on revenue from land sales to meet their repayments.
Auditors also found that 108.3 billion yuan of total borrowings had been issued or used improperly, citing methods such as providing fraudulent collateral or diverting the funds raised into capital or real estate markets.
Source : New Age
