The finance and agriculture officials have begun an investigation of major debts incurred by rural authorities, the Beijing-based Economic Observer reported Tuesday.

The total owed by township governments and village committees is estimated to reach 400 billion yuan (US$50 billion) according reports on a survey by the Ministry of Agriculture (MOA).

Most of towns and villages in heavy debt are located in underdeveloped regions in central and western China, the newspaper reported, commenting that the heavy debt hindered rural reform and restricted development.

In 1999, the State Council issued a circular on investigating and clearing bad debts at township and village levels, but the task was incomplete as the MOA had no rights to clear or transfer debts.

On October 18 this year, the State Council issued another circular on investigating township government and village committee debt incurred before December 31, 2005.

This time the Ministry of Finance (MOF) is required to make proposals and find solutions to clear the debts.

"The government will give priority to the clearance of debt arising from compulsory education, infrastructure construction and public welfare undertakings," according to an MOF preliminary plan.

Experts estimated the debt at township level had increased at 20 billion yuan annually since 2004.

Lending rates for township governments and village committees are excessively high, generally above 15 percent, and even up to 30 percent.

"The statistics will be collected by local governments after their verification and calculation and then reported to the central government," an MOF official said.

Many local governments believe debts accumulated over long periods can only be repaid or transferred by the central government.

"Our debt is so huge that no one except the central government can clear it," an official of Inner Mongolia Autonomous Region said.

(Xinhua News Agency November 29, 2006)