Chinese auditors launch urgent assessment of mounting debt

THE CHINESE national audit office is to undertake a review of the government’s debts, following instruction from the government’s State Council, which is chaired by Premier Li Keqiang.

The office released a one-line statement announcing the review. The People’s Daily, a Chinese communist party newspaper, followed with an article suggesting that the project may require around the same time as the 2011 audit, which took five months.

Higher government debt is a legacy of economic stimulus projects which began in 2008.

Earlier this month, a report from the International Monetary Fund on China said: “The near-term challenge is to contain risks to financial stability, by reining in credit growth”.

According to Legal & General Investment Management, the stock of gross debt in the Chinese economy is around 190 per cent of GDP, which is higher than most developing countries. The IMF has estimated that government debts alone are equivalent to just under half of GDP.