SHANGHAI/HONG KONG :China's push to revive the economy this year by increasing infrastructure spending while warding off financial risks is facing headwinds from massive local-government debt, which is more than $9 trillion and growing.As debt obligations mount, some local governments are pushing banks to ext
SHANGHAI/HONG KONG :China's push to revive the economy this year by increasing infrastructure spending while warding off financial risks is facing headwinds from massive local-government debt, which is more than $9 trillion and growing.
"The LGFVs have become the black hole of the Chinese financial system. They have been used to fill the gap between local government revenue and expenditure," said Andrew Collier managing director at Orient Capital Research. "LGFVs are under considerable pressure on debt repayment this year, because their income is often associated with real estate and land sales," said Wang Tao, chief China economist at UBS.Chinese Premier Li Keqiang listed"preventing and defusing local government debt risks" as one of the major tasks for the government in the upcoming year, when he delivered the government report on Sunday as China's two sessions kicked off.
In recent months, some state-owned banks, asset managers, and insurers have been looking into their portfolios to screen LGFV borrowers with weaker creditworthiness and dispose them, separate financial sector sources told Reuters.
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