China local government debt surges by 70%

Yuan notes Chinese banks rapidly expanded credit in the market after the global financial crisis to boost growth

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China has local government debts of 17.7 trillion yuan ($2.9tn), up 70% from three years ago, according to an official report.

China's government asked the National Audit Office (NAO) in July to do a round-up of the debts outstanding at a local level.

The report showed some local governments were using new loans to repay more than a fifth of their debt.

China has a total government debt of about 58% of its economic output.

Persistent fears over the level of non-performing bad debt have affected perceptions of the world's second-largest economy, as some worry whether the loans can be paid back.

The figure is still less than half the debt burdens in Japan - the world's third-largest economy - and Greece, but some analysts warn that China's debt cannot continue to grow at this pace forever.

"While China's total government debt remains low by the OECD standards, the pace of the rise is still alarming," said ANZ Bank economists Liu Li-Gang and Zhou Hao.

"This national debt audit result could indicate that China's local government debt almost doubled in about two-and-a-half years."

According to the China Banking Regulatory Commission, local governments took up 80% of total bank lending in China at the end of 2010. Local governments in China borrowed heavily after the global financial crisis, to try to sustain growth rates.

The Chinese central government has repeatedly stressed the urgent need to guard against financial risks, including the local government debt problem.

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  14.  
    MARKET UPDATE 09:53:

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  15.  
    BUSINESS REACTION 09:44: World Service

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    GSK FINED $492M 09:30: Breaking News
    A flag bearing the logo of GlaxoSmithKline flutters next to a Chinese national flag outside a GSK office in  Shanghai

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  18.  
    BUSINESS REACTION 09:15: World Service

    Patrick MacDonald a Scottish entrepreneur, says that small and large businesses "quietly confessed" to him that they have not been sleeping at night. On Business Daily he claims that some were even prepared to make redundancies this morning, in the event on a "Yes" vote.

     
  19.  
    Via Twitter Douglas Fraser Business and economy editor, Scotland

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  20.  
    BUSINESS REACTION 09:04: World Service

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  21.  
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  22.  
    CITY REACTION 08:47: BBC Radio 4

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  23.  
    MARKET REACTION 08:34:
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  24.  
    LLOYDS REACTION Via Twitter Kamal Ahmed BBC Business editor

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  28.  
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  31.  
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  32.  
    MARKET REACTION 07:33: BBC Radio 4

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  36.  
    REFERENDUM REACTION 07:14: BBC Radio 4

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  37.  
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  38.  
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  40.  
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  41.  
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  43.  
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  44.  
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  45.  
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  46.  
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  47.  
    POUND STRENGTHENS 05:54:
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  48.  
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  49.  
    BANK OF ENGLAND 05:42: BBC Radio 4

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  50.  
    POUND STRENGTHENS 05:36:
    Pound dollar

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  51.  
    05:30: Ben Morris Business Reporter

    The pound has bounded higher overnight in reaction to the Scotland vote. More reaction through the morning. Stay with us.

     
  52.  
    05:30: Matthew West Business Reporter

    Morning folks. It looks like - with 26 of 32 local authorities now having declared the result of their ballots- that the No campaign is on course to win the Scottish independence referendum. We'll bring you all the reaction from the financial markets and the business community as it comes in. As always if you want to get in touch you can email us at bizlivepage@bbc.co.uk or tweet us @bbcbusiness.

     

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