Local Chinese government debt could really be US$3.2 trillion

Amount owed banks in 2011 is double official estimates.

Former Finance Minister Xiang Huaicheng said his estimate for provincial and city government borrowings is almost double the US$1.7 trillion figure from the National Audit Office. The combined debt of China's central and local governments may currently be more than US$4.8 trillion, said Xiang.

"It seems the central government's debt level is quite transparent, while local government debt isn't, and therefore it's not easy to get a clear picture," Xiang said. He said his figures are personal estimates, however.

China has sought to limit borrowing by local governments because of concerns that banks will be saddled with bad debts. The People’s Bank of China, the central bank, in 2011 estimated that local governments had established more than 10,000 financing arms to fund the construction of roads, bridges and sewage plants. Local governments are banned from directly taking bank loans or selling debt.

Loans to China's local government finance vehicles (LGFVs) amount to US$1.5 trillion, a rise of 2% in two years, said the Banking Regulatory Commission Chairman.