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Fears that China could soon be facing its own Lehman-style banking meltdown are being fueled by a National Audit Office report which found 531 billion yuan (US$84 billion) worth of irregularities in local government debt.
According to the Chinese government website (www.gov.cn), the audit found 10.7 trillion yuan of local government debt at the end of 2010, a result of easy loans made possible by the government’s 2008-2009 stimulus injection.
Most of the money, say analysts, has found its way into the construction industry, creating entire cities, complete with apartments and offices that remain empty and unsold.
Many companies also have unpaid inventories, according to the government audit, and have little or no oversight of accounts.
“The audit discovered that 1033 such companies have problems such as false-financing, the registered capital being unpaid-in, illegal provision of funds and the withdrawing of them by local governments and departments, involving a sum of 244.15 billion yuan,” the audit said in its findings.
“As the investment of debt funds is mainly directed by these companies at projects serving public welfare or quasi-public welfare whose recovery of funds takes a fairly long time, their profit-yielding capabilities are rather weak.
“A total of 1734, or 26.37%, are loss-making companies.”
Stimulus money has also made it easy for provinces to get involved in massive infrastructure projects, such as high-speed railways, remote airports and even port projects that remain largely unused, analysts say.
Larry Lang, professor of finance at the Chinese University of Hong Kong, was reported by The Epoch Times as saying that China’s economy is on the “brink of bankruptcy” and that “every province is a Greece.”
The remarks were made in a lecture by Lang in Shenyang City in northern China’s Liaoning Province and reported after they were posted on YouTube.
In a controversial series of claims, Lang said that overall debt in China was as much as 36 trillion yuan (US$5.68 trillion), official inflation figures of 6.2% were as high as 16%, domestic consumption represented only 30% of economic activity and that there was “serious excess capacity.” He added that despite government headline figures of 9% growth in GDP, production had actually shrunk in China.
He also said China had one of the highest overall tax rates in the world and that Chinese businesses were paying as much 70% of their earnings in direct and indirect taxes.
“Once the economic tsunami starts, the regime will lose credibility, and China will become the poorest country in the world,” Lang concluded in the lecture.
Originally posted by Mkoll
I wonder if they actually have a plan for those ghost cities and facilities? Such as places to evacuate people to in the event of massive natural disasters or nuclear warfare