Audit Results on Gov't Loans Show Conflicting Assessments
(Beijing) -- The recently-released result from the National Audit Office's review of local government debt has cast a glaring light over differing standards and accounts by other agencies.
The 10.7 trillion yuan estimate announced on June 27 by the NAO came out much lower than previous market expectations. Data from the China Banking Regulatory Commission (CBRC) indicated that the value of combined local government financing platforms alone had exceeded 9 trillion yuan.
The NAO's audit covered a much broader range of local government debt liabilities.
In its report, the NAO said there were 6,576 local financing platform vehicles. In contrast, the central bank stated in its 2010 Chinese Regional Financial Operation Report that, as of the end of 2010, the number of local financing platform vehicles had reached over 10,000.
According to the NAO's categorization, local government loans consist of direct liabilities, guaranteed debt and indirect liabilities. As of late 2010, the amount for the three types of loans stood at 6.7 trillion yuan, 2.3 trillion yuan and 1.7 trillion yuan, respectively.
The result indicated that the central government intends to classify 10.7-trillion-yuan worth of loans as local government debt obligations. In 2004, the figure was only 400 billion yuan.
The loans were made as the central government rushed to bail out the market using stimulus packages during the two financial crises in 1998 and 2008.
Analysts say that the central government may consider raising taxes during the 12th Five-Year Plan period to help alleviate local government debt burdens.
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