- October 16, 2018
- Posted by: admin
- Category: Daily News
- “Hidden” local government debt in China is projected to have hit as much as CNY40tr (USD6tr), or 60% of China’s gross domestic product in 2017, an alarmingly high rate as the country’s economy cools and manufacturing starts to suffer from China’s trade dispute with the US.
- While the exact number is not known because much of the debt is not held on balance sheet, a report from S&P Global estimated that local government financing vehicles, or LGFVs, have racked up between CNY30tr and CNY40tr (USD4.5tr and USD6tr).
- While local governments have more recently been allowed to issue bonds, and Beijing has sought to crack down on off-balance-sheet financing for local governments, LGFVs have remained active. Local governments have used public-private partnerships and investment funds to finance many of their infrastructure projects in recent years, according to the S&P report.
- The result of the high level of debt, according to the report, could be defaults at local governments – particularly at “weaker prefectural city-level or district-level governments” – as China’s economy cools off.