Beijing tells banks to roll over local government debt

Beijing has instructed banks to begin rolling over the debt of local government borrowers, in some cases extending loans by as much as four years, the Financial Times reported. Analysts have worried about a potential reckoning from the estimated RMB10.7 trillion (US$1.7 trillion) in debts which have accumulated with the country’s local governments since Beijing rolled out its stimulus plan in 2009. Over half of those loans are due to mature over the next three years, leading to worries about a wave of defaults and non-performing loans. Officials say they are waiting for the projects to become solvent. “From a longer-term perspective, the investment project launched during the financial crisis will have no problem generating a return,” said Fan Jianping, chief economist at the State Information Center, a government-linked think tank. “It is just that many have not yet been completed.” While China’s banking regulator initially insisted that all local government loans would be paid back on time, it has since backed off this stance.