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| China orders audit of government debt | China orders audit of government debt |
| (35 minutes later) | |
| China has ordered a nationwide audit of all government debt, underlining fears that the recent slowdown in its economy may impact the financial sector. | China has ordered a nationwide audit of all government debt, underlining fears that the recent slowdown in its economy may impact the financial sector. |
| Local governments in China borrowed heavily after the global financial crisis to try to sustain growth rates. | Local governments in China borrowed heavily after the global financial crisis to try to sustain growth rates. |
| The last audit, published in 2011, showed they had debt of 10.7tn yuan ($1.7tn; £1.1tn) by the end of 2010. | The last audit, published in 2011, showed they had debt of 10.7tn yuan ($1.7tn; £1.1tn) by the end of 2010. |
| Debt may threaten China's growth, and there are growing fears that local governments may not be able repay. | Debt may threaten China's growth, and there are growing fears that local governments may not be able repay. |
| "In line with a request of the State Council, the National Audit Office (NAO) will organize auditing agencies across the country to carry out an audit of government debt," the national auditor said in a statement on its website. | "In line with a request of the State Council, the National Audit Office (NAO) will organize auditing agencies across the country to carry out an audit of government debt," the national auditor said in a statement on its website. |
| The NAO said that it had halted all other projects to conduct the audit, but did not give any other details or a timeline for the audit. | The NAO said that it had halted all other projects to conduct the audit, but did not give any other details or a timeline for the audit. |
| Pressure on finances | |
| A large part of the local government borrowings were taken up after the global financial crisis as Chinese authorities released a 4tn yuan fiscal stimulus. | |
| According to the China Banking Regulatory Commission, local governments took up 80% of total bank lending in China at the end of 2010. | |
| Some of the borrowings were spent on infrastructure projects, such as road and rail - seen as vital to sustain orderly economic development - but some of it also went into property construction. | |
| There have long been fears that the projects may not be financially viable in the long run. | |
| "A lot of the projects that were invested in will not have the kind of returns that they had initially estimated," said Dariusz Kowalczyk, senior economist with Credit Agricole-CIB in Hong Kong. | |
| "That coupled with slowing growth means that the finances of the local governments may not look too good." | |
| 'Large and unknown' | |
| At the same time, there have been concerns about the size of total government debt in China, with some arguing that the figures for local government debt have been underestimated. | |
| According to the NAO's last audit, local government debt was around 25% of the China's total gross domestic product (GDP). | |
| But many have said that the levels may be much higher than that. | |
| Last year, the audit office said that it had uncovered 531bn yuan of irregularities in local government debts. | |
| It said that breaches included "irregular credit guarantees", "irregular collateral" and "fraudulent and underpayment of registered capital". | |
| Mr Kowalczyk said that the concerns about the bad loans in China were serious because "the size of the debt is large and unknown". |