China local governments to sell US$206 billion of financing debt

CHINA plans to allow local governments to sell 1.5 trillion yuan (S$280 billion) of special financing bonds to help 12 regions repay debt, Caixin reported. 

The regions involved are under more pressure to repay local government debt, and they include Tianjin, Guizhou, Yunnan, Shaanxi and Chongqing, Caixin reported on Saturday (Aug 19), without saying where it got the information. 

The Chinese central bank may set up a special purpose vehicle with banks to provide low-cost and long-term liquidity to local government financing vehicles (LGFVs), the report said. The planned measures are expected to help LGFVs reduce liquidity risks, it said. 

The debt of LGFVs and other off-balance sheet issuers is one of the biggest threats to the Chinese economy and its financial stability. President Xi Jinping has previously described the issue as one of the “major economic and financial risks” facing China. 

The government began a round of nationwide inspections to work out how much money local governments owe, another sign of how authorities were working to tackle financial risks, Bloomberg News reported in June.

The ruling Communist Party’s Politburo, China’s top decision-making body, said in July that it would use a package of measures to resolve local government debt.