Nationwide debt audit crucial for policymaking

Luo Zhongwei, a researcher at the Institute of Industrial Economics under the CASS, also said the country must first gauge the size and structure of government debt and assess potential risks in order to make informed economic policies.

In local governments' pursuits of urbanization and economic growth, it is inevitable that government debt may further rise, Luo said.

"Local government debt itself is not fearful at all. The key is to make sure that there are no bubbles in it," Luo said.

However, experts, including Yang, saw China's local debt risks are generally controllable at present, while stressing the country must work to avoid potential risks in the future stemming from dropping revenue from land sales of local governments, a major source of government income.

Data from the Ministry of Land and Resources showed that land sales in 2012 dropped 14.6 percent from a year earlier to 2.69 trillion yuan due to the government's tightening efforts to rein in the property market.

Wang Xiaoguang, an expert with the Chinese Academy of Governance, said that the forthcoming audit will help the central government determine hidden problems in local government financing.

"Through the audit, the country will be able to spot and solve potential local debt problems, and thus safeguard stable and sustainable growth in the long term," Wang said.

Yang suggested the government establish a scientific and effective local government debt management mechanism and regulate local government debt issuance to avoid vicious debt expansion.