China orders nationwide government debt audit

BEIJING Sun Jul 28, 2013 11:17am IST

A woman counts Chinese yuan notes at a market in Beijing, July 1, 2013. CREUTERS/Jason Lee/Files

A woman counts Chinese yuan notes at a market in Beijing, July 1, 2013. C

Credit: Reuters/Jason Lee/Files

BEIJING (Reuters) - China's National Audit Office will conduct an audit of all government debt at the request of China's State Council or cabinet, it said in a statement on Sunday, underlining concern over rising debt levels in the world's second biggest economy.

The audit office, responsible for overseeing state finances, made the announcement in a one-sentence item on its website, but gave no details on the audit.

The official People's Daily newspaper said separately on its website, citing unidentified sources, that an urgent order for the audit was issued on Friday and work will start this week.

The audit could indicate increased official concern over the systemic risk from rising debt levels in China, especially debt of local governments, as top leaders slow economic growth in order to promote reform.

A local government buckling under the weight of its own debt is a troubling scenario for the leadership, and one that Deutsche Bank has said could potentially pose a systemic and macro economic risk to the country.

Standard Chartered, Fitch and Credit Suisse have estimated local government debt in China at the equivalent of anywhere between 15 percent and 36 percent of the country's output, or as much as $3 trillion based on World Bank GDP figures for 2012.

Vice Finance Minister Zhu Guangyao said earlier this month that the government did not know precisely how much debt local governments had built up.

The audit office warned in a June report that debt levels among local governments are rising and the financial burdens and risks are not being properly managed. It put total debt of a sample of 36 local governments at 3.

China's budget law forbids local governments from taking on debt directly, but they have borrowed heavily through special-purpose vehicles, while many have also borrowed from companies in private arrangements at high cost, with the money often used in speculative real estate projects. (Reporting by Jonathan Standing; Editing by Michael Perry)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Canada Shooting

Canada Shooting

Attack on parliament, killing of soldier stun Canada's capital.  Full Article 

Earnings Season

Earnings Season

Wipro sees rosier end to year as U.S. clients spend.  Full Article 

Business Climate

Business Climate

Fears for tough penalties grow as India cleans up business  Full Article 

New Email Service

New Email Service

Google launches new email service dubbed "Inbox".  Full Article 

DLF Appeals

DLF Appeals

DLF seeks interim relief from capital market ban  Full Article 

Falling Oil Prices

Falling Oil Prices

Indian consumers respond to softer oil, food prices  Full Article 

Book Keeping

Book Keeping

RBI fires warning shots on companies' lack of FX hedging.  Full Article 

Policy Repo Rate

Policy Repo Rate

Most external members suggested rate cut in RBI's Sept review.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage