Beijing's deleveraging drive may see first local default

Shanghai

CHINA may finally be ready to cut the cord when it comes to the country's troubled local government financing vehicles (LGFV).

Beijing's deleveraging drive has seen rules impacting LGFV debt refinancing tightened, spurring a slump in issuance by the vehicles, which owe about 5.6 trillion yuan (S$1.1 trillion) to bondholders and are seen by some as the poster children for China's post-financial crisis debt woes. Signs the authorities may be taking a less sympathetic view of the sector has ratings companies flagging the possibility that 2017 could see the first ever default by a local financing vehicle.