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China's top auditor says that the country's local governments had run up bank loans totaling almost 2.8 trillion yuan, by the end of last year. Most of the money was used to fund infrastructure construction, and pay for government stimulus package projects.
Liu Jiayi, head of the National Audit Office reported to the National People's Congress. He suggests local governments strengthen control over their financial vehicles to shield against risks. In 2009, auditors also found that new loans granted by the Industrial and Commercial Bank of China, the China Construction Bank and the Bank of China were unreasonable in terms of their structure.
Among the problems were the high proportion of medium and long-term loans, a rapid growth in real estate loans and insufficient support for the agricultural industry and small enterprises.