The high level of government savings deposits could prove detrimental to long-term economic growth, even as concerns mount over ballooning local government debt in China, a report said on Wednesday.

 

Total bank deposits held by government agencies and public institutions reached 18.3 trillion yuan ($2.99 trillion) by the end of September and accounted for 30 percent of total GDP, Liang Hong, chief economist of the investment bank at China International Capital Corp Ltd, wrote in the report.

 

Moreover, the huge amount of government savings is expanding at a rate of 20 percent annually, much higher than the growth of the country's GDP and the money supply, which grows by about 13 percent annually, according to the report.

 

The swelling bank deposits held by government bodies excluding State-owned enterprises have exposed problems in Beijing's wealth management strategies as the central and local governments have kept raising money at the cost of more than 6 percent while putting it back in banks as savings with interest rates of less than 3 percent, the report said.

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