China launches audit of its government debt

30 Jul 13
China has ordered an urgent and comprehensive audit of government debt.

The plans were confirmed  in a brief statement on China’s National Audit Office website.

'Recently, as requested by the State Council, the public accounts
committee will co-ordinate every auditing organisation throughout the
country to carry out an audit of national debt,' it said.

Reports stated that NAO inspectors would be dispatched to cities and provinces this week, with leave being cancelled in some areas.

The move follows warnings from the International Monetary Fund that excessive borrowing, particularly by Chinese local government, threatened the fiscal stability of the country.

In a report published earlier this month, the IMF highlighted ‘growing vulnerabilities in local government finances [which] stem from a mismatch between expenditure mandates and revenue sources’. It added that Chinese local government was relying heavily on land sales to locate the necessary finance.

‘Borrowing by local government finance vehicles (LGFVs) has increased significantly since 2009,’ the IMF’s report said.

‘Expanding the definition of government to include LGFVs and off-budget funds, [the IMF] estimates that in 2012 “augmented” government debt was 45% of GDP and the “augmented” fiscal deficit was around 10% of GDP.’

 

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