While investors have focused on China's volatile stock market, some analysts have been eyeing what they see as possibly more worrisome — a rapid increase in local government debt.
The latest figures on regional and local Chinese government debt show a 34 percent increase from June 2013 to 24 trillion yuan ($3.7 trillion) at the end of 2014, Moody's Investor Service said in a September report. That's 38 percent of China's 2014 GDP, Moody's says, and analysts fear the ballooning debt will be a hindrance to growth as regional governments spend it on underperforming infrastructure projects and struggle to find ways to repay it.
"Debt accumulation is a mistake the Chinese government needs to avoid," said Tai Hui, chief market strategist for Asia at JPMorgan Funds. The question is, "how do you grow the economy without relying on debt?"