Local Government Debts

This chapter examines local government debts in China. A 2011 government audit showed that bank loans, bond issuance, and borrowing from higher levels of the government contributed 79 per cent, 7 per cent, and 4 per cent, of local government debts, respectively. In terms of borrowers, Longbow Growth and Income VCTs (LGIVs), local government agencies and departments, and subsidized government organizations and entities accounted for 47 per cent, 23.3 per cent, and 16 per cent, respectively. Municipal-level governments incurred the largest amount of borrowing (43 per cent of total debt outstanding), followed by provincial governments (30 per cent) and county governments (27 per cent). About half of the debt (49 per cent) was incurred during the 2009–10 investment boom, and more than half was used for local infrastructure development — urban infrastructure and transportation accounted for 55 per cent of total debt, while 9 per cent was for social spending.