What is actually happening with Chinese local government debts?
Based on People’s Bank of China, right now there is around 14.4 trillion Yuan of debts owed by the local government financing vehicles (LGFVs). But according to the National Audit office total local government debts amounted to 10.7 trillion Yuan.
Estimates by National Audit Office and People’s Bank of China seem to me different. So which numbers are the correct one? 10.7 trillion, 14.4 trillion, or what?
Based on the 2010 4th quarter Monetary Policy Report, total Chinese Yuan loans amounted to 47.9 trillion Yuan. So 30% of the total loans will be no more than 14.4 trillion.
If, China is 40-trillion-Yuan economy then Central government owns 6 trillion of debts (15% of GDP), Ministry of Railways now has about 2 trillion of debts (5% of GDP), LGFVs debts roughly amount for 36% of GDP.
So it looks like the debt burden of the public sector is 74% of GDP and total local government debts can get to 20 trillion Yuan or more (roughly 50% of China’s GDP).
FINAL= Total debt-to-GDP ratio will get very close to 90% of China’s GDP.
Do you think China’s Local Governments Really Want To Default On Their Debts?