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China's hidden debts exceeds US$1.7 trillion yuan: report
Kao hsing and Staff Reporter
2012-04-22
11:35 (GMT+8)
A woman in Shanghai. (Photo/Xinhua)
A major debt crisis may be hiding behind China's speedy economic growth and could cause its economy to collapse, warns a chief economist at Shanghai Securities Co, saying the central and local governments in China have incurred enormous debts. If these hidden debts are taken into account, total debt could be 68.33% of China's gross domestic product, higher than the alarm threshold of 60% set by the international community.
A Shanghai Securities Co research report said China's cumulative internal and external national debt was 6.75 trillion yuan (US$1.07 trillion) at the end of 2010, while its hidden debts were 10.94 trillion yuan (US$1.73 trillion).
Hidden debts refers to debts for which governments assume responsibility of repayment in case of default. For instance, debts incurred by the Ministry of Railways, shortages in social insurance funds, and nonperforming assets of state-owned banks and financial institutions are typical hidden debts.
As of 2010, the National Pension Insurance Fund registered a shortfall of 4 trillion yuan (US$634 billion) and the Ministry of Railways incurred nearly 1.9 trillion yuan (US$301 billion) in debt. By 2009, three policy banks issued 4.5 trillion yuan (US$713.45 billion) in debt and incurred 71.1 billion yuan (US$11.27 billion) in foreign debt.
In addition, even after the four state-owned banks underwent reforms and were listed on the stock market, they had debt of 439.46 billion yuan (US$69.67 billion), which is categorized as government hidden debt.
However, economist Yang Jiangwen said the calculation of hidden debts do not necessarily include National Pension Insurance Fund shortages. If they were included, hidden debt would become enormous, attracting attention from the market, impling that Shanghai Securities was suspected of manipulating its financial report, according to Yang.
Another scholar said there was no standard for defining what items should be included in hidden debt. According to the central bank's 2010 report, the government registered a fiscal deficit of 1 trillion yuan (US$158 billion), accounting for 2.5% of its GDP.
