China's top auditor on Sunday warned of a debt risk in the world's <g data-gr-id="19">second largest</g> economy due to unbridled borrowing by local <g data-gr-id="18">goverments</g> and called for an evaluation and early warning system to contain any instability.
Briefing lawmakers on the auditing of the implementation of the central government 2014 budget, National Audit Office (NAO) chief Liu Jiayi <g data-gr-id="22">said</g> "certain local governments have difficulty in repaying their debt." For <g data-gr-id="21">years</g> China has struggled to rein in local government debt. A huge risk to financial stability, these debts were incurred through unbridled borrowing during the investment and construction binge which followed the 2009 global financial crisis.
While debt once helped the prodigious expansion of an investment-based economy, it now appears unsustainable as the growth model is rebalanced towards consumer demand. There is no official public data on size of the problem, but the NAO estimated direct local government debt at 10.9 trillion yuan (about USD 1.8 trillion) at the end of June 2013, state-run Xinhua news agency reported.
According to Liu, some 1.86 trillion yuan, or 17 <g data-gr-id="26">per cent</g>, of this debt will mature this year.
A recent NAO survey involving nine provinces, nine cities and nine counties discovered local government debt at the end of last year to have ballooned by 46 <g data-gr-id="16">per cent</g> from the 2013 level.