The next round of payments on China's local government debts are soon due in March and April, to the tune of some 350 billion yuan (US$57 billion).
The results will separate those who are able to finance and control debt risk from those who can't, reports Shanghai-based China Business News, citing a research report from the Bank of Communications.
According to statistics from the National Audit Office, as of June 2013 government debt at all levels totaled about 20.7 trillion yuan (US$3.4 trillion), of which domestic government debt accounted for around 10.9 trillion yuan (US$1.8 trillion). Of this amount, 2.39 trillion yuan (US$390 billion), or 22%, is due in the spring.
The consensus on all sides is that overall risk is under control, but some local governments may struggle to pay their debts. As of June 2013, the debt ratio of three more provincial governments exceeded 100%, as did 21 more city governments and 96 more county-level governments, compared with the end of 2010. County governments are statistically the worst at repaying their debt.
Since 2009, China has seen two periods of rising financing leverage, with the first round during 2009-2010, and the second from June 2012-2013, said Li Yang, vice president of the Chinese Academy of Social Sciences.
According to Li, as of June 2013 domestic government debt with direct repayment responsibility reached 10.9 trillion yuan (US$1.78 trillion), up 62.44% from 6.71 trillion yuan (US$1.095 trillion) at the end of 2010. If including possible debts, as of June 2012 total domestic debt reached 17.9 trillion yuan (US$2.92 trillion), up 67.3% from 10.7 trillion yuan (US$1.75 trillion) at the end of 2010, Li said.
The National Audit Office warned that this year's 22% marks a new peak in repayment amounts. The percentage will slowly diminish, starting at 17.06% in 2015, 11.58% in 2016, 7.79% in 2017, and 18.76% after 2018.
Experts said domestic debt is still under control as funds of the debts are used chiefly in investments, not consumption.
The domestic government debt includes loans obtained via government financing platforms, municipal corporate bonds, bonds issued by the local governments, loans obtained from higher-level authorities and other loans.
