UBS wary as China seeks global help to clean up local debt mess

Beijing

CHINA is turning to global markets to help clear up a regional debt mess. Not everyone wants to be involved.

At least six local-government financing vehicles (LGFVs) have sold US$3.9 billion of bonds overseas this year, up from about three in 2014. They include Beijing Infrastructure Investment Co, which issued three-year euro notes at one per cent, lower than the 4.9 per cent yield on its similar onshore debt. The finance arms have to repay a record 702.6 billion yuan (S$156.8 billion) of bonds this year, compared with 304.1 billion yuan in 2014, according to data compiled by Bloomberg.

Premier Li Keqiang has decided to phase out LGFVs, set up before the government allowed regions to sell municipal notes, leaving the level of state backing unclear. Aberdeen Asset Management Asia Ltd said some of the securities should be considered equivalent to government debt, while UBS Global Asset Management Ltd said relying on bailouts wasn't wise. The pool of regional liabilities h…