(Yicai Global) Feb. 16 -- The majority of China’s provincial-level governments have revealed the balance of their debts, with the authorities noting that their debt-related risks are generally stable and manageable.

Seventeen of China’s 31 provincial-level governments, autonomous regions, and municipalities directly under central government control had a debt balance of more than CNY1 trillion (USD145.9 billion) at the end of last year, while each of the quartet of economically strong provinces -- Guangdong, Shandong, Jiangsu, and Zhejiang -- had a debt balance of over CNY2 trillion. 

For the other provincial-level governments, the balance was below CNY1 trillion. Xizang Autonomous Region had the lowest at CNY56.1 billion (USD8.2 billion). 

China manages local government debt through quotas. Annual quotas for each local authority’s new debt issuance are decided by the central financial authorities. Generally speaking, provinces, municipalities and regions with greater financial strength have a bigger demand for borrowing and lower debt-related risks, so they are given larger quotas.

Another key indicator to measure local government debt risk is their debt-to-income ratio. The globally recognized warning line for this figure is 120 percent, which is also adopted by China’s finance ministry. 

Of the 31 provincial-level governments, 23 had a debt ratio of more than 100 percent, while those with the lowest were Jiangsu at 73.3 percent, Shanghai at 65.7 percent, and Xizang at 21.3 percent.

The severe impact of Covid-19 outbreaks was mainly to blame for the increase in some local government debt ratios, said Luo Zhiheng, chief economist at Yuekai Securities.

Local government debt pressure is still controllable, Luo said, adding that the main risks are from invisible debts of local government-backed urban investment platforms and companies. This is a more common problem in central and western regions of China that have weaker financial strength, he noted. 

Editors: Tang Shihua, Tom Litting