Zhang Ke, Vice President of the Chinese Institute of Certified Public Accounts and chairman of the Beijing based ShineWing (HK) CPA Limited said during an interview with Financial Times that due to concerns about risks, his firm has ceased its audit businesses relating to local governments’ issuance of bonds. “The situation is out of control.”
“We have audited the bonds that some local governments have issued. We found they were very high risk, so we withdrew.” Zhang continued, “Most local governments do not have the ability to pay back the principal or service the debt. Things could become very serious.”
Zhang also said, “The situation is out of control. There may be a crisis. However, because the due dates on these debts keep getting extended, they have become long-term debts. Therefore, the timing of the burst is uncertain.” He indicated that, from public squares to road improvements, many local governments have put money into investments and received mediocre returns. Now they can do nothing but borrow new money to pay old debts. Zhang said, “This approach will not survive much longer. … When that time comes, it will not be the government but CPA firms and banks that will bear the ultimate responsibility.”
The Beijing based ShineWing (HK) CPA Limited claims that it is the largest domestic CPA firm in China.
Source: Caijing.com, April 17, 2013
http://economy.caijing.com.cn/2013-04-17/112682959.html