BEIJING — China announced the size of its local governments’ debts for the first time on Monday, which experts said will ease concerns over systemic financial risks.
Liu Jiayi, the auditor-general of the National Audit Office, said in a report submitted to China’s top legislature that local government debts totaled 10.72 trillion yuan ($1.66 trillion) by the end of 2010. Only 54 county governments out of more than 2,800 in the country had zero debt, according to the report.
Liu’s report marked the first time for China to publicly reveal the size of its local governments’ debts. The National Audit Office said a year ago that 18 provinces, 16 cities and 36 county-level governments had accumulated debts of 2.79 trillion yuan by the end of 2009.
“There have been concerns about a possible hard landing for the Chinese economy, as well as systemic financial risks, based on the overflow of local government debts. The disclosure of the size of local government debts will ease these concerns,” said Li Yang, vice president of the Chinese Academy of Social Sciences.
“There are local-level risks, but these are not as serious as some people thought,” Li said.
The indebted local governments have repayment obligations for approximately 62 percent of the total 10.72 trillion yuan sum. Obligations under bond account for 21.8 percent of the debt and obligations to render assistance make up the last 15.58 percent, according to Liu.