Nine of the country's provincial capital cities have seen their debt ratio reach over 100 percent, sources from the National Audit Office
(NAO) were quoted by China Enterprise News as saying Tuesday.
"After a two-year audit of the debts of 36 local governments, the audit office found that the highest debt ratio of a provincial capital city reached 189 percent," the sources said, without identifying the nine cities.
Data from financial information portal laohucaijing.com shows that the top 10 heavily indebted provincial capital cities are Nanjing, Chengdu, Guangzhou, Hefei, Kunming, Changsha, Wuhan, Harbin, Xi'an and Lanzhou.
The country's audit watchdog NAO published an audit report in June on the 36 local governments showing that their outstanding debt totaled 3.85 trillion yuan ($163.2 billion) by the end of 2012, up 12.94 percent from 2010. But this was not a nationwide audit, so it couldn't accurately reflect the entire picture of the country's local government debt.
To audit the public debt more comprehensively, the NAO said that China will launch an official audit of public debt nationwide starting from August 1 at the requirement of the State Council.
But industry watchers expressed doubts about proper execution of the new round of nationwide audit.
"During the previous round of audit, the audit office neglected the debt from the local government financing vehicles in consideration of the government officials' performance and achievements," a general manager at a local government financing vehicle in East China's Zhejiang Province was quoted by the newspaper as saying.
Media reports have said the accumulated local government debt was mainly caused by the government's 4 trillion yuan stimulus package during the global financial crisis in 2008, but the manager said the local governments' poor ability to balance investment, consumption and imports are the direct cause.
Fitch Ratings downgraded China's local currency credit rating in April partly due to the growing risks of financial stability, given the opaque and mounting local government liabilities.