BEIJING (REUTERS) - China's National Audit Office will conduct an audit of all government debt at the request of China's State Council or cabinet, it said in a statement on Sunday, underlining concern over rising debt levels in the world's second biggest economy.
The audit office, responsible for overseeing state finances, made the announcement in a one-sentence item on its website, but gave no details on the audit.
The official People's Daily newspaper said separately on its website, citing unidentified sources, that an urgent order for the audit was issued on Friday and work will start this week.
The audit could indicate increased official concern over the systemic risk from rising debt levels in China, especially debt of local governments, as top leaders slow economic growth in order to promote reform.
A local government buckling under the weight of its own debt is a troubling scenario for the leadership, and one that Deutsche Bank has said could potentially pose a systemic and macro economic risk to the country.
Standard Chartered, Fitch and Credit Suisse have estimated local government debt in China at the equivalent of anywhere between 15 percent and 36 percent of the country's output, or as much as $3 trillion based on World Bank GDP figures for 2012.
Vice Finance Minister Zhu Guangyao said earlier this month that the government did not know precisely how much debt local governments had built up The audit office warned in a June report that debt levels among local governments are rising and the financial burdens and risks are not being properly managed. It put total debt of a sample of 36 local governments at 3.85 trillion yuan (S$787 billion) at the end of 2012 China's budget law forbids local governments from taking on debt directly, but they have borrowed heavily through special-purpose vehicles, while many have also borrowed from companies in private arrangements at high cost, with the money often used in speculative real estate projects.