Two more Chinese firms cease public project funding amid deepening debt woes

TWO Chinese transport and infrastructure companies set up by local government in part to fund non-profit public projects, known as local government financial vehicles (LGFVs), said on Tuesday (Sep 12) they would no longer participate in such projects, joining a growing number of LGFVs that are going independent as Beijing tackles municipal debt woes.

The two companies, both based in China’s eastern Jiangsu province, said they would cease to act as LGFVs and seek to become commercially viable, according to statements posted on the website of Pizhou city government in Jiangsu.

LGFVs were set up by local governments to fund infrastructure investment but now represent a major risk to China’s slowing economy, with their combined debt ballooning to roughly US$9 trillion.

Beijing plans to put several thousand LGFVs under tighter scrutiny, while barring new LGFVs from selling bonds publicly, Reuters reported on Monday, citing two people with knowledge of the matter said. Meanwhile, some LGFVs are being nudged to wean themselves off government support and operate on a commercial basis.

The two companies in Jiangsu said they would be responsible for their own profit and losses in future, having paid off debts with implicit government guarantees.

An increasing number of LGFVs in Jiangsu province have transformed into independently commercial entities since August, state-owned newspaper the Paper reported on Tuesday. REUTERS