BEIJING:  Local governments in China are earning a notorious reputation for racking up major debts and failing to deliver on debt repayments. The problem has gotten so severe that Beijing was forced to roll over substantial portions of local debts.

The South China Moring Post reported that, "China's banks have rescheduled at least three quarters of loans made to the country's local governments that were due to be repaid by the end of last year, according to Financial Times calculations from official data."

The newspaper disclosed that banks had rolled over an estimated 3 trillion yuan ($482 billion), or even more, of 4 trillion yuan in loans and interest that had fallen due for repayment by the end of last year.

According to the South China Morning Post, "the paper's calculations were based on data reported by local media showing that local governments had total outstanding loans of 9.2 trillion yuanas at the end of last year. That figure was 9.1 trillion yuan at the end of 2010."

In most instances, Chinese banks are mandated to hand over massive loans to State-owned enterprises, such as its government-run media, which fail to earn profits and struggle with corruption allegations. These so-called loans often are not repaid by the SOEs’ as they seek more subsidies from Beijing to fund operating costs.

To read the entire article from the South China Morning Post, link here:

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