Sovereign Man’s Tim Staermose shares a staggering stat about China’s local government debt:
It’s interesting to note that China’s National Audit Office (NAO) recently published a report which says the country’s outstanding local government debt is now equivalent to $1.7 TRILLION. That’s a huge figure — about 27% of China’s GDP in 2010.
Because the NAO’s figure was based only on a sampling of 6,500 local government-backed financial vehicles (out of more than 10,000 such vehicles nationwide), the actual magnitude of local government indebtedness is likely to be much greater. China’s own Central Bank estimates the number to be 30% higher than the NAO figure.
Reporting from Guangzhou, Staermose observes much of the infrastructure to be eerily empty.
While I’d never sell China short (as I agree with Rogers that long term, China is coming)…I’d also be cautious about piling into Chinese shares, and even industrial commodities, right now.