People's Daily, the official newspaper of the Party, criticized local governments on Wednesday, saying some had borrowed money mainly to improve their political standing, regardless of the strength of their financial position and leading to higher levels of debt-related risk.
The National Audit Office
(NAO) released Monday an audit of holdings at the end of 2012, showing that local government debts had reached 3.85 trillion yuan ($627 billion), up 12.94 percent or 440.9 billion yuan from 2010.
The audit covered the cities of Tianjin, Shanghai, and other provincial-level governments and municipalities across the nation.
In some areas, the debt levels rose by over 20 percent compared to 2010, according to the NAO, which called for more effective measures to strengthen debt management and guard against risk.
Local governments borrow money to finance various projects and have taken it for granted that they will be able to borrow more, even after racking up high levels of debt, People's Daily quoted Ding Maozhan, a researcher at the Chinese Academy of Governance, as saying.
Ding said that some local government officials have been pursuing growth-first strategies to expand GDP in order to boost their performances and chances of promotion, and that local governments hope to recoup the money from selling land or attracting investment.
According to a report released Tuesday by Citibank, local government debts in China reached 12.1 trillion yuan in 2012, an increase of 1.4 trillion yuan from 2010.
In April, Fitch Ratings downgraded China's local currency sovereign rating by one notch from A+ with a stable outlook to AA- with a negative outlook.