BEIJING, Dec. 31 (UPI) -- China's local government debt jumped to 17.7 trillion yuan ($2.95 trillion) by mid-year, up 12.7 percent from December 2012, its National Audit Office said.
The local government debt total at the end of June also was up more than 65 percent from the 10.7 trillion yuan at the end of 2010.
China's growing local government debt has become a source of concern because of risks of default.
The official Xinhua News Agency, quoting a research note by Lu Ting, chief China economist with Bank of America Merrill Lynch, said China's total government debt stood at 53.3 percent of China's gross domestic product, with 31.5 percent of that attributed to local government debt.
The New York Times said since the global financial crisis five years ago China's local governments have been accumulating debt to finance real estate and infrastructure projects, although analysts have been concerned about the ability of some of these investments to pay interest and principal on the borrowed money.
The situation has arisen as local governments in China are generally not allowed to take loans or issue bonds, leaving them to establish their own financing vehicles from which to borrow funds for their projects.
Lu Ting's research note said: "We believe the markets and the Chinese government should be alarmed by the rapidly rising leverage, but we do not believe China is on the brink of a debt crisis," Xinhua reported.
Xinhua also quoted the National Audit Office that risks of government debt are generally controllable, but there are some risks in some places.
The NAO said federal authorities took the problem of government debt seriously, and governments at various levels had made some progress in paying back some debt and regulating local government financing vehicles.
However, it said a large number of debt-financed projects have not generated any cash flow.