Chinese local governments’ US$2.4 billion of concealed debt is uncovered by audit office
Hidden debts were racked up by borrowing through financing vehicles and deals forbidden by the finance ministry, report says
China’s latest official audit report has exposed more than 15 billion yuan (US$2.4 billion) of undeclared debt in local governments that worked around the rules to fund infrastructure projects.
This “hidden debt” worries economists and regulators despite China’s overall government debt falling last year to 36.2 per cent of its GDP, comfortably below the level of most advanced economies.
It came in the form of local authorities guaranteeing, often by informal arrangements, borrowing by companies known as local government financing vehicles (LGFVs), which fund projects on behalf of local governments.
Chinese President Xi Jinping has been urging local governments to cut their debt levels to reduce financial risk in the world’s second-biggest economy, but for some of them the addiction to debt has proved difficult to kick.
In its fourth quarter report, released this week, the National Audit Office found debt risks for governments in five provinces that had used various means to accumulate hidden liabilities.