Rein in speed of debt rise

At the end of last year, the National Audit Office released the results of its long-awaited updated survey of China's local government debt, which totalled 17.9 trillion yuan ($2.95 trillion) in June 2013, up from 10.7 trillion yuan at the end of 2010, when the previous tally by the NAO took place.

Included in the June 2013 total is around 7 trillion yuan of contingent liabilities that the NAO calls "debt that the governments may have". These contingent liabilities, largely resulting from explicit and implicit government guarantees by local governments to local government investment platforms, rose a full 75 percent from the end of 2010 to June 2013, as local government investment platform borrowing continued to take place on a very large scale, despite earlier intentions to rein it in.

The NAO's survey confirms that a large-scale rollover of local government debt is taking place, as the short-term maturity of most loans is inconsistent with their use in financing infrastructure, which tends to generate direct or indirect revenues only after a time lag. Indeed, the NAO found that 23 percent of the local government debt matured in the second half year of 2013. With another 22 percent maturing in 2014, rollover - either into new loans or bonds - will have to continue in 2014.