Tightening grip on debt

SHANGHAI: China is stepping up restrictions on financing to local government financing vehicles (LGFVs) to mitigate risks from hidden debt, the official Securities Times reported yesterday.
Several banks and insurers are connecting their systems with a platform of the Ministry of Finance that monitors liability and expenditure of LGFVs, the newspaper said, citing industry sources.
Local governments have been under pressure to boost economic growth through infrastructure spending via LGFVs, but the risk of defaults has raised jitters in financial markets as Beijing has signalled it will allow some heavily-indebted LGFVs to fail.
In future, banks and insurers will refrain from providing fresh liquidity to those platforms that enjoy implicit guarantees from local governments, and will prevent hidden debts from increasing. – CNA