BEIJING: Fitch Ratings on Tuesday warned that it would take ratings action against Chinese local governments if revisions to their fiscal data were significant, after recent reports on fake economic data deepened concerns about governance and oversight.
Local and regional governments in China have long been suspected of cooking up numbers. Blame is often put on ambitious local officials trying to brighten their career prospects by delivering stellar work reports.
The agency's comments come after the autonomous region of Inner Mongolia earlier this month said its fiscal revenue for 2016 ought to be 26 percent, or 53 billion yuan ($8.3 billion), less than initially stated.
Fitch reacted by downgrading its internal assessment of the creditworthiness of the northern Chinese region. It also cut the ratings on the senior unsecured bonds due 2020 issued by Inner Mongolia High-Grade Highway Construction and Development Co to BBB- from BBB, with a negative outlook.
Local and regional governments globally do not have internationally accepted accounting policies. In China, Fitch relies on official fiscal data from provincial and local administrations, which are then approved by the local legislatures.
Recent falsification by provincial governments may highlight shortcomings in the auditing process, particularly in terms of central government oversight, Fitch cautioned.
"We would expect recent data manipulation problems to prompt a focus on tighter supervision, including stronger and more transparent reporting requirements and stricter disciplinary measures to discourage falsification," it said in a report on Tuesday.
The National Audit Office said in December that 10 city and county governments had been found to be inflating their fiscal revenue by a total of 1.5 billion yuan.
But the local authorities so far exposed for data manipulation represent only a small portion of the 44,000 local and regional governments across China, Fitch said.
China will look into reports of irregularities in regional economic data, and will deal with any impropriety according to the law, the head of China's statistics bureau said last week. - Reuters
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