China is backsliding on a pledge to impose fiscal discipline on local governments by phasing out borrowing through special-purpose vehicles that allow provinces, cities and counties to skirt restrictions on local debt, according to the Financial Times. In landmark policy guidelines two years ago known as “Document 43,” China’s cabinet stated that borrowing by local government financing vehicles – investment companies owned by the government but ostensibly separate from the fiscal budget – “must not increase government debt.” But after a dip in 2015, off-budget debt has returned this year. Net bond issuance by local government financing vehicles (LGFVs) hit RMB 1.07 trillion ($160 billion) in the year to late September, higher than the RMB 946 billion issued for all of 2015, according to data from Wind Information.
Categories