SHANGHAI/SINGAPORE (Reuters) - China's local governments must pay attention to high levels of debt to prevent and defuse the risk of default and contagion, state media Economic Daily said in a commentary on Thursday, as concerns over local debts mount.
"Once the government debt management is relaxed, it would easily evolve into a 'grey rhino', carrying huge potential risks," the newspaper wrote, referring to a metaphor for a probable but yet ignored threat.
"A series of issues should be given great attention and properly handled," it said.
The newspaper said some local governments have outstanding fiscal balance issues and some local government financing vehicles (LGFVs) are under greater pressure to repay debts.
LGFVs are typically investment companies that raise money and build infrastructure projects on behalf of local governments. Investors and economists are becoming more concerned about municipal debt risks following LGFV debt repayment stresses seen in provinces such as Guizhou and Yunnan.
Localities should "find ways to coordinate all kinds of capital and asset resources to steadily resolve the stock of hidden debts, and resolutely curb the increase of hidden debts," The Economic Daily said.
"Only by better preventing and defusing local government debt risks can we achieve fiscal sustainability and stable and healthy economic operation," the commentary said.
The total debt of China's LGFVs has swelled to a record 66 trillion yuan ($9.2 trillion), equivalent to half of the country's economy, from 57 trillion yuan last year, according to an International Monetary Fund report.
($1 = 7.1687 Chinese yuan)