China's top auditor warns of local debt risks: Xinhua

China's top auditor warns of local debt risks: Xinhua
PHOTO: Reuters

BEIJING - Some Chinese local governments are struggling to repay debt the country should have "an early warning" system to control debt risks, the country's top auditor was quoted as saying on Sunday.

China has been trying to deal with a mountain of local government debt - a legacy of unbridled spending during the global financial crisis, which was estimated by the audit office at 17.9 trillion yuan (S$3.71 trillion) at the end of June 2013.

"Certain local governments have difficulty in repaying their debt," the official Xinhua news agency Liu Jiayi head of the National Audit Office, as saying.

Liu said China should set up "an evaluation and early warning system" on local government debt to help control risks.

A recent audit of nine provinces, nine cities and nine counties found local government debt at the end of 2014 was 46 per cent higher than the 2013 level, Xinhua quoted Liu as saying.

But debt grew at a much slower rate this year, expanding just 0.1 per cent during the first three months, it added.

Nomura, the Japanese bank, estimated in a recent research note that by 2014 local government debt had actually reached 22.6 trillion yuan.

Local governments have been allowed some local governments to high-interest, mostly off-balance sheet local government debt for municipal bonds with lower yields.

Separately, Xinhua quoted Liu as saying authorities have investigated more than 2,200 government officials for involvement in major fiscal fraud.

Auditors also found that some 780 billion yuan in land transfers funds were misappropriated by officials to fill administrative expenses gaps, lent to others or used to construct new office buildings and venues, Xinhua said.

 

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