Governments take out trillions in loans
Source: Xinhua |
June 24, 2010, Thursday
|
Print Edition
Print Edition
CHINA'S top auditor said yesterday that the country's local governments had run up bank debt totaling almost 3 trillion yuan by the end of last year, most of it to fund infrastructure construction.
Liu Jiayi, head of the National Audit Office, said that 18 provincial, 16 city and 36 county-level governments audited had accumulated debts of 2.79 trillion yuan (US$410 billion).
Loans totaling 1 trillion yuan were secured from banks and financing platform companies last year, and another 1.7 trillion yuan dated from previous loans, said Liu in his report to the 15th session of the Standing Committee of the 11th National People's Congress.
According to China's law on government spending, it is illegal for local governments at all levels to have deficit accounts, and local governments should clear their loans within the fiscal year.
It is the first time that China's central authorities have released details of local government debts since potential risks from the chaotic local government financing activities became a serious concern.
The report said only 9 percent of new debts in 2009 were invested in the central government's 4 trillion yuan stimulus package projects.
A considerable proportion of last year's loans were used to finance transport and other infrastructure facilities started before 2008, it said.
The report gives the public a glimpse into local governments that have constantly violated state law with legal and illegal financing channels to pay for booming urbanization.
The central government allows local governments to establish financing platform companies with their fiscal fund, land and other assets to supplement capital revenues for economic and social development.
However, local governments are prohibited from using their revenues and government assets to guarantee loans from banks and other finance institutions.
The State Council, China's Cabinet, ordered local governments earlier this month to halt all forms of fiscal revenue guarantees for debts.
Liu Jiayi, head of the National Audit Office, said that 18 provincial, 16 city and 36 county-level governments audited had accumulated debts of 2.79 trillion yuan (US$410 billion).
Loans totaling 1 trillion yuan were secured from banks and financing platform companies last year, and another 1.7 trillion yuan dated from previous loans, said Liu in his report to the 15th session of the Standing Committee of the 11th National People's Congress.
According to China's law on government spending, it is illegal for local governments at all levels to have deficit accounts, and local governments should clear their loans within the fiscal year.
It is the first time that China's central authorities have released details of local government debts since potential risks from the chaotic local government financing activities became a serious concern.
The report said only 9 percent of new debts in 2009 were invested in the central government's 4 trillion yuan stimulus package projects.
A considerable proportion of last year's loans were used to finance transport and other infrastructure facilities started before 2008, it said.
The report gives the public a glimpse into local governments that have constantly violated state law with legal and illegal financing channels to pay for booming urbanization.
The central government allows local governments to establish financing platform companies with their fiscal fund, land and other assets to supplement capital revenues for economic and social development.
However, local governments are prohibited from using their revenues and government assets to guarantee loans from banks and other finance institutions.
The State Council, China's Cabinet, ordered local governments earlier this month to halt all forms of fiscal revenue guarantees for debts.
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