BBC: China debt 'six times official figure'

China's public debt could be up to six times higher than the official government figure, according to a study by the Hong Kong arm of investment bank Credit Lyonnais. The report puts China's debt at almost 140% of gross domestic product (GDP), compared with a government figure of just 23%.

Credit Lyonnais stressed that calculating China's debt is highly uncertain. Official estimates are supplied without reliable support and so have to be taken on trust.

The Credit Lyonnais study takes into account debts and unfunded pension obligations of state-owned firms, but these are not included in government figures. Chinese economic statistics are currently coming under increasing scrutiny.

Potential crisis?

The latest data could give international investors lured by China's bullish 7% annual growth rate reason to hesitate. According to Credit Lyonnais, China's debts are on a par with those of recession-struck Japan.

Dr Jim Walker, Chief Economist at Credit Lyonnais, described the report's findings as "alarming," but said he believes the Chinese government is doing enough to avoid a major financial crisis.

Much of the problem stems from the way in which China's big four state banks were forced to support state-owned enterprises in the past. The government wanted to avoid corporate failures and consequent mass unemployment. But banks are beginning to operate more commercially, analysts say.

"The state sector is very rapidly now being shrunk," Dr Walker told the BBC's World Business Report. "Private sector growth is much higher quality growth, the return on that growth is higher quality, and therefore the tax revenues and the ability to service high debt is actually improving in China really quite dramatically," he said.