FX.co ★ China to audit government debt

China ordered a nationwide examination of the governmental debt, including provinces and municipalities, The China Daily reports. The reason for this was the speculations that the debt burden may put a drag on economic growth.
As a part of the audit, the government will reassess the debt volumes of the local authorities which were estimated at 10.7 trillion yuan (1.75 trillion dollars) at the end of 2010. To compare, the country’s GDP was equal to 52 trillion yuan.
It is widely expected that the National Audit Office will organize agencies across the country to conduct the examination. The last audit in 2011 took about 5 months and the government hopes that this time it will not last for longer.
The government may ease loan conditions for local authorities if the audit shows good results. However, the Finance Ministry experts suggest that the outcome would not be too sunny.
Complied with the report, based on the officials’ survey in 36 provinces, the local authorities’ debts have risen by 13%. Lately, provinces and municipalities authorities took out about 80% of total bank lending in China.
Meanwhile, the experts are spooked that such crackdown may do harm for the development of infrastructural projects. This, in its turn, can be a powerful obstacle to the GDP increase, given that the indicator has already cooled down to 7.5%, its worst reading since 2008-2009.