Over 99% of Chinese cities hide debt levels, Tsinghua University study reveals

An original version of this article appeared in Hong Kong Free Press on August 11, 2015:

Over 99 percent of Chinese cities did not disclose the local government’s debt level to the public, a new financial transparency report revealed.

The report, published by Tsinghua University in late July, examined the financial transparency of 652 local governments in the country. It found that 646 of the 652 cities failed to disclose the local debt to the public.

The only six cities that disclosed the information were Beijing, Guangzhou, Shanghai, Tianjin, Ningbo and Xiamen.

Tsinghua University

Tsinghua University. Photo: WikiMedia.

The report said there were huge discrepancies in the level of financial transparency among different local governments. It also criticised that some of them did not disclose the most basic financial information, such as government spending and expenditure, to the public.

In China, local governments are known for their huge debt levels. Even though they are responsible for paying for public services and infrastructural projects in their districts, they only have a limited income in tax from local residents. They are also required to share some of the proceeds with the central government.

local government debt

A illustration showing local government debt in China. Photo: Baidu.

Last week, Caixin news quoted an official that the local government debt may have reached as high as RMB30 trillion.

During the 4th Plenary Session of the 18th CPC Central Committee in 2014, the Chinese government passed a bill that emphasised the need for financial transparency in the country. It also said that local governments should make their financial budgeting open to the public.

Also in 2014, the Chinese legislature passed an amendment bill to the Budget Law, stating that all government spending and expenditure should be made available to all citizens.

4th Planery Session of the 18th CPC Central Committee

4th Planery Session of the 18th CPC Central Committee. Photo: 163.com.

The Tsinghua report said that the existing system in China “contained serious deficiencies,” adding that a lack of financial transparency could weaken its effort to combat “growing corruption.” It also said financial transparency amounted to the public’s right to information.

However, the Caixin report also quoted a professor who headed the study that there was no strict requirement on local debt disclosure in China.

Tsinghua University started publishing its annual report on the financial transparency of local governments in 2012.

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