Calls for China to accelerate financial reforms grew louder yesterday after figures showed its indebted local governments owe nearly $3 trillion in a debt build-up that some analysts called alarming.

The National Audit Office, China's state auditor, said in a report local governments had total outstanding debt of 17.9 trillion yuan at the end of June, a sum that includes contingent liabilities and debt guarantees.

The debt load is in the middle of market forecasts and leaves China with total government debt of around 58 per cent of gross domestic product.

Analysts said this suggested China is not on a verge of a fiscal crisis - the figure is less than half the debt burdens in Japan and Greece where public finances are strained - but warned the world's second-biggest economy needed to urgently reduce debt if it wanted to safeguard growth and financial stability.

This is especially because the long-awaited report showed some governments were using new loans to repay more than a fifth of their debt, and that authorities still relied heavily on selling land to pay off old loans. China's mountain of local government debt is among the biggest threats to its economy as investors worry a good part of it cannot be repaid since most of the money borrowed had paid for non-lucrative public infrastructure.

The prospect of defaults have raised fears that they could saddle Chinese banks with a load of bad debt and destabilise China's financial system.

"While China's total government debt remains low by the OECD standards, the pace of the rise is still alarming," ANZ economists Liu Li-Gang and Zhou Hao said in a note.

"This national debt audit result could indicate that China's local government debt almost doubled in about 2-1/2 years."

Beijing acknowledges the risks and have promised to curtail fiscal dangers by revising policies. New policies include letting investors pay for the building of some public works, allowing governments to tap more financing sources, and pegging performances of governments to total debt incurred.

Yesterday's results are a first step in China's latest efforts to tidy its public finances. Beijing had ordered the audit in August, the first of such since 2011, amid growing public scepticism about the accuracy of official debt data.

Despite reiterations from Beijing that China's local government debt levels had stabilised in the past three years, Monday's results showed debt incurred by local authorities was up 67 per cent compared to the 2011 audit.

However, the audit is more comprehensive than 2011's because it includes money borrowed by more than 33,000 township governments. In all, the auditor reviewed the finances of nearly 36,300 local governments to compile the latest figures. Prior to yesterday, the most pessimistic market estimates of what local governments owe have been close to $4.1 trillion.

"China's government debt risks are in general under control, but some areas have certain dangers," the state auditor said.-Reuters