Many of China’s local governments are struggling to repay debt amid slowing economic growth and lower land sales revenue, China Business News reported Monday.
Local government debt was 11 trillion yuan (US$1.78 trillion) at the end of June 2013, of which 2.4 trillion yuan is outstanding and must be paid this year, the report said.
Nine provinces ran up a combined overdue debt of more than 800 million yuan from the end of June 2013 to the end of March this year, according to the National Audit Office.
“Our local government debt risk is manageable on the whole but there are certain places that may have potential risks,” the report quoted Finance Minister Lou Jiwei as saying.
Local governments have relied on land revenue as a critical source of fiscal income but an economic slowdown, coupled with the harshest curbs on the property market in years, has slashed sales.
In the first half, land sales by local governments rose 26.3 percent to 2.11 trillion yuan from a year earlier. However, land revenue grew just 7.3 percent in June as a result of the sluggish property market.
“The land market is quite lackluster and land auctions have failed many times. In order to stimulate land sales, we have to make the plots smaller, even if prices are already very low. We have to sell to ensure cash flow,” an official from Nanjing was quoted as saying.
At least 22 provinces are lagging their sales targets and 11 have reported their fiscal revenue increased by a single digit, the report said.
Meanwhile, local governments have issued new debt to repay old debt. Nine provinces have issued a combined 57.9 billion yuan of new bonds to repay maturing debt, according to official data.
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