As mentioned on more than a few occasions, China’s bubble burst would have significant ramifications for the global economy.
From China Daily:
Local governments had an overall debt of 10.7 trillion yuan ($1.65 trillion) by the end of 2010, said China's top auditor on Monday in a report to the National People's Congress.
He warned that some were at risk of defaulting on payments.
It was the first time the world's second-largest economy publicly announced the size of its local governments' debts. The scale amounts to more than one-quarter of its GDP in 2010, which stood at 39.8 trillion yuan.
Concerns are rising that the problem of local government debt could destabilize the financial system of the country if it is not managed properly, especially after the central government's tightening of the housing market, which could affect local fiscal revenue that is highly dependent on land sales and make debt repayment more difficult.
In addition, China's ambitious plan to construct 36 million affordable homes during the coming five years, including 10 million in 2011 and 10 million in 2012, added to worries about increasing capital tension and rising non-performing loans in commercial banks.
About 79 percent of the local government loans were made by banks across the country, according to the NAO.
Lu Zhengwei, chief economist at the Industrial Bank, said the figures released were moderate compared with previous estimates, and risks lying in these loans are quite limited.
"Overdue loans take up only a small proportion of the total lending and local governments didn't pay them in a timely way mainly because deadlines were too concentrated, not because of deteriorated ability to repay."
http://usa.chinadaily.com.cn/epaper/2011-06/28/content_12793025.htm
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment