China's Debt_ China's cities keep mum in deep fog of debt

asiaone

China's cities keep mum in deep fog of debt

THE WALL STREET JOURNAL
Wednesday, Aug 5, 2015



Real estate agents talk with potential clients at the entrance to a residential compound in Yanjiao, Hebei province, Jan 11, 2015. Photo: China Daily/ANN


One of the murkiest aspects of China's public finances is the extent of its local-government debt. It's not just that most Chinese cities refuse to venture a public estimate, one of the country's most prestigious think tanks said in a recent report.

The actual number itself may be lost in a statistical Tower of Babel among local-government accounts.

According to the survey by a research institute in Beijing's Tsinghua University, local-government debt was the worst-performing indicator in terms of public transparency among 294 major Chinese cities. Only six cities - Beijing, Shanghai, Guangzhou, Tianjin, Ningbo and Xiamen - disclosed their debt levels, the report said.

"Among many city governments, even the most basic financial information is not disclosed," the report said.

The depth of local-government debt gives a clue to the extent of China's financial worries, as it measures one key aspect of the systemic risk to China's broader financial stability.

China's thousands of local governments, extending well beyond the cities in the Tsinghua survey, have been racking up large amounts of debt since the 1990s, when the central government in Beijing began moving to take control of vast swathes of local revenue collection.

This recentralization of finances forced localities to turn to debt as a means to sustain local spending and investment. It also kicked off an addiction to loans.

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