A growing number of Chinese local government financing vehicles (LGFV) are failing to repay money they owe to suppliers in the form of commercial paper debt, according to some analysts, underscoring growing financial stress among companies tasked with raising funds to support infrastructure investment, reports Nikkei Asia.
At the end of August, 43 LGFVs—including parent companies and subsidiaries—had failed to redeem maturing commercial paper at least three times over the previous six months, analysts at Lianhe Credit Investment Consulting, a consultancy, wrote in a note last week based on data from the Shanghai Commercial Paper Exchange. That’s up from 27 at the end of July.
LGFVs are set up by local authorities to raise money for infrastructure and public welfare projects. But tighter oversight of their borrowings on the one hand, and growing pressure to find more money to help local authorities boost investment on the other, has left them increasingly strapped for cash.