High debts in China due to rapid urbanization: scholar
January 1, 2014, 12:15 am TWN
TAIPEI -- The rapid growth of government debts among China's local government bodies is a result of their push for urbanization, according to a top Chinese scholar.
The Beijing News cited Liu Shangxi, deputy head of the Research Institute of Fiscal Science under China's Ministry of Finance, as naming urbanization the main culprit for the explosion of debt among provincial and municipal governments over the past two years.
“Local governments have been enthusiastic about taking the initiative to push for urbanization,” he said, noting that debt does not necessarily mean an increase in financial risk.
The level of risk will hinge on geographic location, level of economic development and ability to repay debts, he told the paper.
According to China's National Audit Office, government debts across all levels reached 20.6988 trillion yuan (US$3.42 trillion) as of the end of June. Local governments' debts accounted for more than half of that number at 10.8859 trillion.