Xinhua republished a report by China Business Times on worries about the rapid increase in local debts. The report referred to government sources on the fact that local debts have risen from RMB 4 trillion to 7 trillion in only a few months. The State Council met on May 26 to arrange regulations on local financing platforms and debts. Experts believe that the actual amount of local debts is very hard to find out. Local governments utilize various platforms to borrow money that are not included in the official budget. The transparency of these loans is typically poor. One of the causes of this situation is the irrational distribution of funds between the central government and local governments. Current Chinese law prohibits local governments from issuing bonds.
Source: Xinhua, June 3, 2010
http://news.xinhuanet.com/2010-06/03/c_12174046_2.htm