China Local Government Audit ‘Credit Negative,’ Moody’s Says

China’s government risks being forced to bail out some local authorities and take over their liabilities after a report from the nation’s audit office showed a jump in borrowings, Moody’s Investors Service said.

The National Audit Office review indicates that total local government direct and guaranteed debt may have risen 13 percent to 12.1 trillion yuan ($2 trillion) by end-2012 from end-2010, Moody’s said, citing its own calculations based on data in the report which showed a 13 percent increase in the debts of a sample 36 local authorities.