One of China's newest and most sophisticated commercial and residential center stands unmatched in downtown Beijing on December 11, 2013. China's capital is the second most expensive city in Asia for expatriates, jumping up the ranking from fifth place last year while Tokyo still tops the list despite a sharply weaker yen, a survey showed last week. UPI/Stephen Shaver | License Photo
BEIJING, Dec. 23 (UPI) -- China's local government debt may have soared to about 20 trillion yuan ($3.3 trillion) at 2012 end, or nearly double from 2010, a government think tank said.
The Global Times, citing a report by the Chinese Academy of Social Sciences, said the debt compared with the audited debt figure of 10.7 trillion yuan two years earlier.
"The growth of debt quickened rapidly in recent years. With the slowdown of the economy and reduction of revenue sources, some local governments, especially those who heavily rely on resource development and land sales, will face greater pressure to pay back their debt," Zhang Yongjun, a research fellow at the China Center for International Economic Exchanges, told the Global Times.
The rising local government debt level raises the risk of default. Part of the reason for it is excessive lending by banks to regional financing institutions because local governments are not authorized to borrow. The local governments also use their own financing mechanism that relies on land sales.
In other figures, China's total central and local governments reached nearly 28 trillion yuan at the end of 2012, or about 53 percent of the country's gross domestic product.
"China's debt level was lower than that of major developed economies, but higher than other BRICS countries except South Africa. It is still at a moderate and controllable level," the think tank said.
The BRICS group includes Brazil, Russia, India, China and South Africa.
Zhang said China's total government debt as a proportion of the country's GDP is not significant when compared with other major economies such as nearly 100 percent in the United States, more than 200 percent in Japan and 90 percent in Europe.
China's just-ended Central Economic Work Conference, however, said "preventing and controlling local government debt" will be among the major tasks to be implemented next year. The steps would include holding the provincial governments accountable for the local debt incurred in their region.
The level of local government debt will also be used as a yardstick to evaluate the performance of local officials.
"The fundamental problem of local governments is that information about local debt is opaque," Zhang Bin, director of the taxation office at the National Academy of Economic Strategy, told the Global Times.
He said several projects, including those which cannot generate returns and those which can, were grouped in one package and financed through local financing platforms, making it difficult to distinguish between the source and nature of the debt, the report said.