Local government debt to be exposed by Li's survey

Like William the Conqueror before him, Premier Li Keqiang is initiating his own Domesday survey in China, and this time the attempt to curb local abuses of power will have global economic consequences.

The State Council, chaired by Li, has ordered the National Audit Office to begin auditing what could total US$2 trillion or US$3 trillion of debt taken on by local governments.

The Audit Office will suspend other work and give all staff "crash" training so that auditors can begin fanning out across the country this week, according to a report by the state-run People's Daily.

The clear implication is that the mainland is seeking to rein in local governments, which have helped along what is clearly a boom and may be a bubble by borrowing and spending freely on local development. For mainland China, this will act as another brake on already slowing growth. For the rest of the world, it means less demand, especially for the kinds of raw materials and energy which go into real estate development and infrastructure.

William ordered the 1086 Domesday Book census of property, so called because it was said to be as thorough and wide-reaching as the final judgment, shortly after the Norman conquest of England in order to nail down who owned what and who might have usurped something belonging to the crown he now possessed.

Li, who assumed office in March, has a related but different problem. Despite laws against it, local governments have taken on huge debts, an amount estimated by the last audit at about US$1.75 trillion at the end of 2010.