Urban rail transit projects across China costing 800 billion yuan are going to weigh heavily on the already high level of local government debt.
May 15, 2013 Leave a comment
More debt trouble is rolling along rails
Wednesday, May 15, 2013
Urban rail transit projects across the mainland costing 800 billion yuan (HK$1.01 trillion) are going to weigh heavily on the already high level of local government debt. The warning about funding challenges presented by subway projects in 24 cities is from the state’s China Economic Weekly. It follows on from US-based Fitch Ratings last month cutting China’s long-term local-currency debt rating, citing rising risks to financial stability given a lack of transparency in the increased borrowing of local governments. It estimated this debt was 12.85 trillion yuan at the end of 2012. On the rail projects, the fear is that 24 cities simply lack the means to pay for the schemes. Guo Tianyong, a professor at the Central University of Finance and Economies in Beijing, pointed to the projects as making the local debt crisis more acute. New projects on the move include Harbin, Changsha, Ningbo and Zhengzhou laying 387 kilometers of track, and eight cities are extending existing networks. Guangzhou Metro Corp executive Ye Zichuan said most subway operators can expect to see greater losses this year. CATHY WU
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