BEIJING: Chinese local governments may have incurred more than 8 trillion yuan (S$1.65 trillion) in debt, including 7 trillion yuan in bank loans, the 21st Century Business Herald reported on Wednesday.

The paper cited statistics from unnamed regulatory agencies. The central government has announced a series of steps recently to regulate the special purpose vehicles that local governments " barred from borrowing in their own name " establish to finance investment projects.

The China Securities Journal has reported that about 40 percent of China's 9.6 trillion yuan in new loans last year went to local governments' financing vehicles.

Beijing has tightened control over bond issues by these vehicles in an attempt to cool down spending and rein in lending, government and industry sources have told Reuters.

Victor Shih, a professor of political science at Northwestern University, said in a recent report that he had examined the debt levels of 8,000 local government investment entities and concluded that they had borrowed the equivalent of $1.6 trillion between 2004 and the end of 2009.

That is roughly one-third of 2009 GDP. China's official public debt is only 20 percent of GDP.

Some investors and analysts worry that a high default rate on loans to local governments, which rely heavily on land sales for their revenues, would badly weaken Chinese banks. Other economists say the worries are exaggerated.