Chinese Provinces may Have a Debt Problem

CHINA’S provincial administrations are often referred to as “local” governments. But the phrase does not do them justice. The province of Guangdong, for example, boasts more than 105m people and a GDP worth more than $1 trillion. Only 11 countries (including China itself) have a bigger population and only 15 have a larger economy.

Equally impressive is the scale of provincial debts. At the end of 2013 China’s national auditor revealed that the liabilities of local governments had grown to 10.9 trillion yuan ($1.8 trillion) by the middle of last year, or 17.9 trillion yuan if various debt guarantees were added. That was equivalent to about a third of China’s GDP. These “local” debts, in other words, had grown fast enough to become a national burden and an international concern.

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