Local government debt has been rising at an alarming rate across China. (Photo/CFP)
The International Monetary Fund's first deputy managing director David Lipton said Wednesday that the Chinese government's debt has risen to nearly half of the country's GDP, the Chinese-language National Business Daily reports.
Lipton said that most local Chinese government revenue comes mainly from the sale of state-owned land, adding that the country's sovereign debt remains under control.
Some economists said however that the current sovereign debt situation has the potential to seriously threaten China's economic growth.
Government figures pegged the country's public debt at 43% of GDP in 2012, totaling 17.5 trillion yuan (US$2.8 trillion), while the IMF estimated the figure at 50% of GDP.
Fitch Ratings has downgraded China's sovereign credit rating, warning that a credit build-up in the economy could threaten its recovery.
In April, Fitch downgraded China's long-term local currency rating from AA- to A+, the first major international agency to cut the country's credit rating.
Fitch said that the country's local government debt had touched 12.85 trillion yuan (US$2.01 trillion) by the end of 2012, accounting for 25.1% of GDP, up 23.4% from 2011. In all, China's public debt, including that of the central government, accounted for 49.2% of GDP, which was close to the IMF's figure, according to data released by the National Audit Office.
On Wednesday, the IMF also lowered its 2013 growth forecast for the Chinese economy to around 7.75% from a previous forecast of around 8%.
An IMF delegation visited China recently to conduct an annual review of Article IV of the Chinese economy. The IMF said that during its meeting with senior officials, Beijing had stressed that it will conduct structural reforms for state-run banks, enterprises and local governments.
The government also agreed to continue opening up the country's economy, reduce financial regulation and let the market take its own course. It also stressed redistribution of income, the IMF said.