Nationwide debt audit crucial for policymaking

BEIJING - China's latest move to conduct a nationwide audit of government debts is a crucial step to collect fundamental data for its economic policymaking, according to experts.

The National Audit Office (NAO), the country's top auditing body, said Sunday that it would organize auditors across the country to conduct a comprehensive government debt audit.

The NAO did not provide any other details, nor a timetable, for the audit, but analysts believe that both central and local government debt will be covered.

Yang Zhiyong, a researcher at the Institute of Finance and Trade Economics under the Chinese Academy of Social Sciences (CASS), said the audit would provide fundamental data about government debt, which will serve as a basis for the country's policymaking.

Risks associated with mounting government debt have been a grave concern in China for years, as the risks may spill over into the entire financial system and affect economic growth.

An audit conducted in 2011 by the NAO found that local government debt totaled 10.7 trillion yuan ($1.73 trillion) at the end of 2010, representing more than 26 percent of the year's gross domestic product.

In early June this year, the NAO said that a follow-up audit found total debt of 3.85 trillion yuan owned by 36 local governments by the end of 2012, up 12.94 percent from 2010.

Liu Jiayi, auditor general with the NAO, said in an audit report in June that the country should improve local debt management to realize complete and dynamic supervision of local debts.