Moody's Investors Service estimates the direct and guaranteed debt of local governments in China could have been 12.1 trillion yuan at the end of 2012. Provided to China Daily

How much have China's local governments borrowed? The answer has always been shrouded in mystery.

The last official update was released by the National Audit Office in mid 2011. It put the nationwide figure at 10.7 trillion yuan ($1.75 trillion) by the end of 2010.

Last week, the audit office issued a new report, a much less comprehensive one covering only 36 local governments at different levels. This said debt in the selected areas had grown 13 percent in the last three years. Extrapolating the audit office's report's 13 percent rise in local government debt across the entire country, Moody's Investors Service estimates the direct and guaranteed debt of local governments could have been 12.1 trillion yuan at the end of 2012.

"However, such an estimate assumes the remaining jurisdictions not included in the NAO report had a similar rate of debt accumulation, which we do not know for sure was the case," said Debra Roane, vice-president and senior credit officer of the sovereign risk group with Moody's.

Selected local governments in the new report comprise 15 provinces and the 15 provincial capital cities, as well as three municipalities and three districts.

Some Chinese officials have also made their estimates: Dong Dasheng, deputy minister of the National Audit Office, said in May the latest debt scale for governments at all levels was between 15 to 18 trillion yuan, while Xiang Huaicheng, a former finance minister, said in April China's local governments might have already borrowed more than 20 trillion yuan.

"I personally agree with former minister Xiang's estimate of 20 trillion yuan stock in local debts," said Zhao Quanhou, head of financial research with the Fiscal Science Research Center at the Ministry of Finance.

Zhao said the figure might vary because of different statistics criteria. Xiang's estimate has taken into consideration all the off-balance sheet financings of local authorities.

China's local governments are not allowed to borrow directly so a series of government-guaranteed investment companies — known as local government financing vehicles — have been established to handle the issue.

However, Zhao said because the central government tightened regulation of the financing vehicles last year, other State-owned enterprises under the supervision of local State-owned assets watchdogs were also asked to raise money on behalf of local authorities. However, such borrowings would not appear on local government balance sheets.