Wuhan has to repay about 100 million yuan every day in 2013 and 2014 as its debts soared on huge expenditures on infrastructure projects in the past years, the latest example showing the seriousness of China’s local government debt

September 24, 2013 Leave a comment

Local debt levels raising alarm 
Monday, September 23, 2013
Wuhan has to repay about 100 million yuan (HK$126.7 million) every day in 2013 and 2014 as its debts soared on huge expenditures on infrastructure projects in the past years, the latest example showing the seriousness of China’s local government debt issue. Debts of the capital city of Hubei province reached 203.71 billion yuan as at June 30, 2012, China Business said, citing an investigation report by an official from the Ministry of Finance.Most of the debts are bank loans.

The report said the city will have 31 billion yuan due in each of 2013 and 2014 – meaning it has to splash out 100 million yuan to repay debt and interest each day in the period.

“Back in 2011, Wuhan’s debt ratio had been 1.36 times higher than international standard,” the report warned.

In fact, Wuhan – with a population exceeding 10 million – has the largest number of infrastructure construction projects among mainland cities.

Construction sites doubled to 11,012 this year from 2012, meaning there is a project every 1,300 square meters.

“The city has been highly reliant on land revenue to repay debts, which has brought it high risks as China’s property market has been volatile,” a local professor said.

China has finished a nationwide audit on local government debts which are expected to hit 20 trillion yuan as at the end of 2012, according to the Chinese Academy of Social Sciences. Early reports said nine provincial capital cities had default risks as their debt ratio soared over 100 percent. GRACE CAO

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