As Township government in Shanghai reportedly borrowed 2 billion yuan (US$293 million) in 2008 under the cover of a national high-speed railway project to repay debt, highlighting the risk of spiraling local government debt.

The Guangzhou-based 21st Century Business Herald reported the news Wednesday, quoting an audit document that was allegedly filed by the National Audit Office (NAO) in 2009 and recently obtained by the paper.

The case reveals the huge pressure placed on

China’s regional governments to finance their spending as China boosted its economy with a 4-trillion-yuan stimulus plan.

However, Xiao Fei, an information official with the NAO, told the China Daily on Wednesday that she was unaware of such an audit document.

The NAO did not provide the newspaper with the document, she said.

According to the report, preliminary national audits in 2009 found that

Jiangqiao Township in Shanghai had obtained loans totaling 2 billion yuan from two banks through a local financial institution owned by the township government.

It promised to invest the funds in projects related to the Beijing-Shanghai high-speed railway, such as land requisitioning and resident relocation.

However, part of the funds had since been found to have been used to finance various property development projects that had nothing to do with the construction of the high-speed railroad. (SD-Agencies)