The solvency of China's local governments is being tested as they pull out all the stops to meet the payment deadline for their heavy borrowings over the last several years.

Because it has become a more challenging task for local officials facing slowing fiscal revenue growth, more market forces, such as equity transfer and assets securitization, could be introduced to help tackle the issue, analysts said.

A comprehensive survey of local governments by the National Audit Office revealed that direct and indirect debt of local governments amounted to 17.9 trillion yuan ($2.94 trillion) as of June 2013, up from 10.7 trillion yuan at the end of 2010. It was equal to 32 percent of the country's gross domestic product that year.