Beijing to cover billions of dollars of local government debt

China’s central government plans to clean up US$308-468 billion of local government debt, in an effort to prevent a wave of defaults that could threaten the country’s stability, Reuters reported, citing unnamed sources. Beijing will pay off some of the loans of heavily-indebted local governments, while state banks will be forced to take some losses on the bad debt. A percentage of the loans will also be shifted to newly established companies and private investors will be invited in on projects that were previously off-limits. A ban on local governments selling bonds will also be lifted. China’s bank regulator, the Finance Ministry and the National Development and Reform Commission plan to start cleaning up the debt in June and finish in September.