China’s local government financing vehicles (LGFVs) are rushing to buy vast quantities of land with borrowed funds, bailing out cities and provinces struggling for cash after an exodus of debt-stricken private sector developers, reports the Financial Times. According to official data, land acquisitions by LGFVs rose to RMB 400 billion ($57 billion) in the first half of the year, up more than 70% compared with the same period in 2021. This is despite overall land purchases, which have previously been dominated by private developers, falling by almost a third as Beijing cracks down on real estate speculation.
The spending spree has been unleashed in the run-up to Chinese leader Xi Jinping’s expected appointment to an unprecedented third term next month and highlights efforts to boost the pandemic-hit economy, which grew just 0.4% year on year in the second quarter.
Local governments have traditionally relied on LGFVs to support growth by spearheading infrastructure investment. Now, the financing vehicles are being called upon to prop up the real estate sector, which accounts for about one-third of total economic output.