China local government debt hits $3 trillion

HONG KONG (CNNMoney) — China revealed the results of its national audit Monday, giving the world a rare look at its rapidly expanding local debt levels.

China’s National Audit Office said that local government obligations hit 17.9 trillion yuan ($3 trillion) by the end of June — a dramatic increase from the 10.7 trillion yuan figure reported in 2010.

The audit office said that debt levels are still controllable, echoing the statements of top Communist Party officials in recent months.

For now, China’s local government debt remains lower than that of many other advanced economies, such as the U.S., U.K., France, Japan, Germany and Spain.

But what is scary is the pace at which debt has accumulated. China’s increase in local government debt is part of a larger issue — a credit explosion as regional governments borrowed to finance major infrastructure projects to combat a slowing economy.