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Chinese local government could owe more 14 trillion yuan in debt, as shown in the new round of nationwide review, Caijing learned, but the real picture could be far more obscure as some of the growing pile of hidden debt would not be included.

While officials have repeatedly offered assurance that the debt is "controllable", industry watchers are expecting regional debt explosions especially in the low levels of local governments. Beijing is also expected to come out with a comprehensive solution to the debt problems, they add.

Extensive examination

The new review, which started in August, is more extensive both in the width and the depth. Unlike previous reviews that cover as many as three levels of administrative divisions, the new review has been carried down through to the township.

The move is both welcoming and annoying for local officials, who are in urgent need for central rescue while fear at the same time that they could be held accountability for building up too much debt.

"Ultimately, [we've decided to] tell out the truth," a local official in Inner Mongolia told Caijing. The official said the debt in the autonomous region surged to nearly 359 billion at the end of 2012, from only 17 billion in 2000.

The exact number of local debt remains vague, though, as the central government lacks a clear dimension in defining local government debt.

There is not a widely accepted interpretation of local government debt, nor of the so-called local government financing vehicles, said Zhao Quanhou, a financial researcher director at the Ministry of Finance. Many state-owned enterprises have once, or many times, acted as a financing vehicle to channel funding for local governments, which auditors may find it hard both to define and manage.

In fact, debt from such dubious funding channels has been excluded from auditors' list, Caijing learned. It's clear that if the part of debt was included, the ultimate figure could have been much bigger. In spite of that, sources close to the matter told Caijing the otherwise figure would not exceed 20 trillion yuan, as forecast by institutions like Standard & Chartered Bank.

Zho estimated that the aggregate debt of local governments should be at between 14 trillion to 18 trillion yuan.

Township debt piles unheeded

Local towns and villages that were covered for the first time in debt review reported huge debt proportions, and even more risks, according to the findings.

The debt in the township level could be valued at around 800 billion yuan, based on their proportion of roughly 5% to 6% of total, Caijing learned.

Local governments in towns and villages finished their reports around August 20, in which, one can find long time-spanned debt piles, with complicated borrowing channels and huge regional discrepancy.

The country has so far no absolute data on township debt, but specially designed reviews in some regions have offered a clue.

As one of the few provinces that have ever conducted township debt review, local government in the southeastern province of Zhejiang found its 612 towns and villages owed a combined 39.9 billion yuan in debt at the end of 2011.

The debt ratio of 112 of them has already exceeded the dangerous 100 percent alarming line, local review found. Just like what their superiors did, the governments had created and amassed a huge number of financing vehicles in various forms.

Without definite fiscal guarantee, governments need to roll over old debt with new borrowing, making the debt highly risky.