Accuracy of debt data open to doubt

According to reports, local government debts will soon be made public. However, few believe published statistics will reflect actual debt conditions.

Investigations by the Economic Information Daily show that large numbers of companies with close relationships with local government financing vehicles (LGFVs) have provided falsified debt data for official surveys. It can be inferred that local governments will inevitably use the data to submit unreliable statistics of their own.

Most LGFVs have also assumed hidden debt guarantees for other financing vehicles. It seems likely that these guarantees will ultimately make their way onto local government balance sheets, since these vehicles are under the control of local officials.

Based on these assumptions, actual debt totals may be far higher than those revealed in forthcoming statistics. This means the potential risks posed by local government debt could be worse than originally estimated.

The central government should formulate scientific investigation tools to obtain comprehensive data over local debt. Only with accurate figures will it be possible to make rational well informed policy decisions. As long as local fiscal conditions remain obscured by mystery, top policymakers and planners will never be able to cope with this key source of risk.