China’s local government financing vehicles (LGFV) need to pay back a record amount of maturing local bonds this year, testing the limits of a central government program to help them refinance their debt and avoid default.
The nation’s LGFVs — the companies that borrow on behalf of provinces and cities to finance mainly infrastructure projects, such as roads and ports — have 4.65 trillion yuan (US$651 billion) worth of bonds due over the next 12 months, according to Bloomberg-compiled data. That’s the highest amount on record, and is roughly 13 per cent more than what came due last year.
“Containing the credit contagion and the systemic financial risk from the LGFV sector remain top priorities for the central government this year,” said Zerlina Zeng, senior credit analyst at Creditsights.
Beijing has taken some steps to alleviate China’s long-standing problem with local debt, providing optimism to investors looking for…
