A measure of the off-the-books debt of Chinese local governments swelled by half between 2019 and 2022, amid shrinking revenue and heavy borrowing to pay for economy-supporting infrastructure projects, reports Nikkei Asia. Debt held by local government financing vehicles (LGFVs) totaled RMB 59 trillion ($8.25 trillion) at the end of last year, according to a recent report from the Rhodium Group.
LGFVs serve as an alternative funding route for cash-strapped local authorities, which the government restricts from raising capital through means other than bonds. They are generally considered to be implicitly guaranteed by local governments, and as such a form of hidden debt.
In addition to funding public works projects, these investment companies have been used to buy state-owned land as actual real estate demand softens, padding revenue but at the same time adding to hidden debt loads.
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