Local treasuries borrow US$1.39t
Source: Agencies |
June 14, 2011, Tuesday
|
Print Edition
Print Edition
CHINESE local governments have borrowed slightly more than 9 trillion yuan (US$1.39 trillion) of bank loans via special financing vehicles, a central bank official said yesterday.
The pile of debt incurred by local Chinese governments is seen by many as a key threat to the world's second-largest economy as an estimated 20 to 30 percent of the loans are deemed to be at risk of defaulting.
The central bank official, who declined to be named because he is not authorized to speak to the media, played down the risks of local government debt to China's economy.
"Although some projects are white elephant buildings without any cash flow, China has a very healthy fiscal position and is able to address the risks," the official said.
The 9 trillion yuan figure given by the official is well under estimates by some analysts that Chinese local governments have borrowed as much as 14 trillion yuan.
Analysts had derived that 14 trillion yuan number based on recent remarks by China's central bank that less than 30 percent of outstanding loans in the country were lent to local governments by the end of 2010.
"A figure of 9 trillion yuan is relatively reasonable while a figure of 14 trillion yuan is too big," the official said.
Last month, two sources said Chinese regulators plan to move 2-3 trillion yuan of debt off the books of local governments and may force China's four biggest banks to share some of the losses.
The pile of debt incurred by local Chinese governments is seen by many as a key threat to the world's second-largest economy as an estimated 20 to 30 percent of the loans are deemed to be at risk of defaulting.
The central bank official, who declined to be named because he is not authorized to speak to the media, played down the risks of local government debt to China's economy.
"Although some projects are white elephant buildings without any cash flow, China has a very healthy fiscal position and is able to address the risks," the official said.
The 9 trillion yuan figure given by the official is well under estimates by some analysts that Chinese local governments have borrowed as much as 14 trillion yuan.
Analysts had derived that 14 trillion yuan number based on recent remarks by China's central bank that less than 30 percent of outstanding loans in the country were lent to local governments by the end of 2010.
"A figure of 9 trillion yuan is relatively reasonable while a figure of 14 trillion yuan is too big," the official said.
Last month, two sources said Chinese regulators plan to move 2-3 trillion yuan of debt off the books of local governments and may force China's four biggest banks to share some of the losses.
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