China Debt Audit Completed; Local Govt Debt Sees 67% Growth in 2 Years

China’s Local Debt Swells to 17.9 Trillion Yuan in Audit
China’s local-government debt swelled to 17.9 trillion yuan ($2.95 trillion), underscoring risks to the financial system as President Xi Jinping rolls out economic reforms.

Debt including contingent liabilities rose about 13 percent in the six months through June, based on figures in a report by the National Audit Office, posted on its website yesterday. That followed a 48 percent increase over the previous two years.

China Says Local-Level Debt Soars, Stirring Fear
In the five years since the onset of the global financial crisis, local governments at the provincial, municipal, county and township levels across China have gone on a spending spree, loading up on debt to finance a surge of investment in infrastructure, real estate and other projects.

Analysts have expressed fears that many of these investments may never make enough money to repay the interest and principal on the debt.

.......Based on findings of the new report, Lu Ting, a China economist at Bank of America’s Merrill Lynch unit, estimated that China’s total public debt stood at 53 percent of gross domestic product. Adding corporate and household obligations lifts the total debt ratio to as much as 190 percent of G.D.P., he estimated.
China's change in local debt alone exceeded GDP growth by 100% in the past few years. The focus on government debt levels is misplaced. The total debt in the economy is very high and growth is heavily reliant on growth. If credit growth slows, the economy will slow, and lots of debt currently serviceable will go into default.

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